Chapter 7 Bankruptcy is meant for individuals residing, having a place for carrying out business or owning property in the United States who want to file bankruptcy in a federal court. The complainant should not have any bankruptcy case in the past 180 days prior to filing the current one. The court appoints a Chapter 7 trustee who looks into the liquidation process or the selling of certain assets to pay the creditors. Under this Chapter, a person is allowed to keep some assets and property which are exempted from being sold off to clear the unpaid dues. An individual’s real estate mortgage and interest on vehicle loans survive on most occasions. Debts that are unsecured in nature are cleared or discharged legally by bankruptcy proceedings. But there are other categories of debt that Chapter 7 Bankruptcy does not take care of like child support, spousal support, student loans, income and property taxes, fines ordered by a court for any criminal offense on the debtor’s part and divorce related property settlements.
Chapter 7 Bankruptcy for businesses
When a business is in extreme financial hardship and is unable to pay back what is due to its creditors, it may file for bankruptcy or be forced to file by creditors, under Chapter 7 Bankruptcy. The trustee is entrusted with the responsibility of examining the financial standing of the business and then taking a call whether to continue operations or stop altogether. In the event of the business ceasing its operations, the trustee sells the assets and distributes the sale proceeds among the creditors. But there are secured creditors who may have taken a collateral from the debtor to issue the loan, like mortgage lenders. These lenders have legal rights over any collaterals which form the security for their loans or claim equivalent value. Such rights can be enforced by the creditors which a debtor cannot challenge nor defeat by bankruptcy. That is why fully secured creditors do not have any share in the distribution of liquidated assets carried out by the appointed trustee.
Abusive cases may change your bankruptcy status to Chapter 13
One issue that plagues the U.S. Bankruptcy Code is abusive filing of bankruptcy cases by debtors in order to avoid payments on flimsy grounds. Sometimes, they are capable of paying a part or their entire debt out of their disposable incomes but hide the facts to manipulate the case in their favor. If a federal court finds out that an individual has filed an abusive case under Chapter 7 Bankruptcy, it changes the status to Chapter 13 which is a debt consolidation measure. Instead of eliminating all legal obligations to pay back the dues, Chapter 13 looks for a financial arrangement to bring down the payments considerably and making them more affordable for the borrower. Call your local debt relief agency to find out whether you can file for Chapter 7 Bankruptcy.
For the best legal advice on Chapter 7 Bankruptcy, Indianapolis has some of the best law firms in the entire state.
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