The nature of chapter 7 bankruptcy is very simple. But first, we must know that bankruptcy laws help people who can no longer pay their creditors get a fresh start – by liquidating assets to pay their debts or by creating a repayment plan. Bankruptcy laws also protect troubled businesses and provide for orderly distributions to business creditors through reorganization or liquidation.
Most cases are filed under the three main chapters of the Bankruptcy Code – Chapter 7, Chapter 11, and Chapter 13. Federal courts have exclusive jurisdiction over bankruptcy cases. This means that a bankruptcy case cannot be filed in a state court.
What is Chapter 7?
A chapter 7 bankruptcy case does not involve the filing of a plan of repayment as in chapter 13 (also called a wage earner’s plan). Instead, the bankruptcy trustee gathers and sells the debtor’s non-exempt assets and uses the proceeds of such assets to pay holders of claims (or the creditors) in accordance with the provisions of the Bankruptcy Code.
In order to start the case, the debtor should file an official petition with bankruptcy court in the area where the person lives or where the business debtor is located. There are forms that will be required to be filled up with a list of all the assets and liabilities that the debtor has together with his brief financial background.
As soon as he files for bankruptcy, creditors are prevented from trying to collect from debts through the power of an “automatic stay.” The stay preserves his property and prevents him from sued.
Aside from the petition, the debtor must also file the following:
1. schedules of assets and liabilities;
2. schedule of current income and expenditures;
3. statement of financial affairs; and
4. schedule of executory contracts and unexpired leases
The schedules must also include a list of the debtor’s property which means any asset or possession not just real state.
The courts charge an approximate of $245 filing fee, $39 miscellaneous administrative fee, and a $15 trustee surcharge. It should normally be paid after the petition has been filed.
It is advisable to seek a reputable bankruptcy attorney to get further chapter 7 bankruptcy information.
