This type of bankruptcy is very popular with most filers. This is because by the time most people are filing it, they are stuck in a situation they cannot get out off. They could be in debt for a number of reasons ranging from unemployment to debt accumulation. The way chapter 7 works is that your non exempt assets are sold off to repay your creditors. The secured creditors always get first priority over the unsecured ones.
There have been new changes in the Chapter 7 bankruptcy laws making it harder for people to file under this chapter. Originally individuals had the option of choosing the bankruptcy chapter that they thought worked best for them. Well, not any more. To qualify for this chapter, you are required to undertake a means test. This investigates your income and expenses. If what you are left with after paying off debts is below the state median, then you qualify to file under chapter 7.
Another new change in the chapter 7 bankruptcy law is that everyone is required to undergo credit counseling on how to handle their finances. If you qualify under this chapter, the advantage is once all your non exempt assets are sold, your debt is cleared. Even if your assets are inadequate to repay the debts, you are no longer apt to your creditors. Keep in mind that even if your debts are cleared, you will still be required to pay any outstanding taxes.
Mercy Maranga writes content on Finance and Debt Management. Visit her site here for more information on Finance and how to effectively Manage your debts. Bankruptcy
This article is free for republishing
Source: http://www.articlealley.com/article_1032297_19.html
Source: http://www.articlealley.com/article_1032297_19.html
About the Author