What is the Main Purpose of Chapter 7 Bankruptcy?
Chapter 7 was mainly designed to allow people to rid themselves of the debt that they have found themselves in for an extended period of time. It provides a means to stopping all of the communication that usually accompanies upset creditors who are looking to be repaid the money that they are owed. While Chapter 7 may not be able to save your house from being foreclosed on, it can get you back on your feet and get your debt vanquished.
What is an "automatic stay"?
Automatic stay refers to the process by which creditors are required by law to not make contact with the debtor after they file for bankruptcy protection. Debtors can be the subject of sometimes hurtful or harassing words from lending agencies that are looking for the returns on their investments. However, an automatic stay makes it illegal for them to contact you any further your delinquent payments. Under the rules of Chapter 7 and 13 bankruptcy filing, creditors risk lawful punishment if they were to make an attempt to communicate with you regarding your debts.
Will I lose my house if I file for Chapter 7 bankruptcy?
Upon reviewing your case, a bankruptcy court may come to the conclusion that the only way to repay creditors is for the debtor's significant assets to be liquidated. This means that cars, homes, motorcycles, and many more items are subject to becoming property of the crediting agency who is owed money. If you are in fear of losing your house, a consultation with a bankruptcy attorney could lead to a decision to file for Chapter 13 protection instead.
What is the difference between Chapter 7 and Chapter 13 bankruptcy?
With Chapter 7, all of your non-exempt possessions are liquidated in order to repay your creditors. Chapter 13 allows you to keep all of your assets while you make payments on a newly restructured payment plan. Chapter 7 is filed by those people who have run completely out of money and are mired in the depths of debt, while Chapter 13 is for debtors that have fallen behind on their payments but have the means to restructure the payments that they are making in order to get themselves out of debt.
What is the Chapter 7 "Means Test?"
The Means Test refers to the bankruptcy court going through all of your financial records to see if you are financially solvent enough to possibly file for Chapter 13 protection instead of Chapter 7. Those who do have the means to make significant monthly payments to repay creditors are given the opportunity to do so through a restructured payment plan. If you have fallen on significantly hard times and can't even begin to think about repaying any of your debt, the Means Test will more than likely prove to the court that you need to file for Chapter 7. If your income is below the median income in your particular state, you are typically able to file for Chapter 7 bankruptcy as long as you have little-to-no discretionary income.
