Contemplating bankruptcy is not something that is taken lightly, the one thing that everyone knows it that it will have a long term affect on ones future credit but other than that, many people do not understand the different forms of bankruptcy.
Chapter 7 bankruptcy is by far the most common method filed. Chapter 7 is commonly referred to as “liquidation bankruptcy”, it involves the sale of all the non-exempt assets of the debtor, this disposal is handled by a court appointed trustee. All the money that results from the sale of these assets is then paid to the creditors at which time the debts are absolved.
Prior to filing for any bankruptcy a debtor should hire a qualified bankruptcy attorney in Palm Desert, the attorney will advise and work with the client, gathering all the records and documents that are necessary to file the petition for Chapter 7. As well as the petition, the debtor must provide the court with a financial statement which fully discloses the current bank balances, credit card debt, any loan documents and proof of income. These documents are absolutely necessary as the court demands proof that the actual financial situation is the same as that included in the bankruptcy documents.
As well as opening all the financial records of the debtor to the court, the individual declaring Chapter 7 bankruptcy will be obliged to take a means test. This test determines if you are in a position to pay your debts or not. The test annualizes your real income using the last six months of pay stubs; it then compares your average income to the median income where you live. If you fail to pass the means test, filing Chapter 7 becomes difficult.
If the means test indicates that the debtor can indeed file for Chapter 7, the court arranges a meeting with the creditors. During this meeting the debtor, who is accompanied by his bankruptcy attorney in Palm Desert must confirm under oath that all the information given to the court is true and accurate. The creditors can also question the debtor at this time.
Once the assets have been seized and disposed of and the proceeds distributed as agreed, the court will discharge the debtor, this discharge prevents any creditor from attempting to collect anything else from the bankrupt, the discharge is tantamount to wiping the slate clean.
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