Revealed – Chapter 7 Bankruptcy Laws
There are different reasons for filing under chapter 7 bankruptcy laws, with both plus and minus points.
Perhaps the major attraction of the Chapter 7 bankruptcy laws is that it allows the applicant to restart their life debt free and with a “clean slate”. However, the downside is that Chapter 7 results in the liquidation of personal property and valuables, including the family home, as opposed to Chapter 13, where no assets have to be sold.
A Chapter 7 bankruptcy stays on one’s credit record for ten years, as opposed to Chapter 13′s seven.
Once a Chapter 7 bankruptcy has been filed, the individual filing then has the protection of the court by means of an “order of relief” and “automatic stay”.
This means that all creditors are prevented from hounding the individual which is important, particularly if a foreclosure notice has been served.
There are some exceptions to debt that can be legally discharged under any type of bankruptcy, including, but not limited to alimony and outstanding tax demands.
Given that a chapter 13 bankruptcy results in a repayment plan so that all debts are subsequently repaid, if a major contributor to the bankruptcy application is debt that cannot be discharged under the chapter 7 bankruptcy laws, chapter 13 would be the most appropriate chapter to file backruptcy under.
The process to file under Chapter 7 bankruptcy laws is as follows:
1. An individual will be requested to list all assets (with values) and details of income. In addition, all debts must be listed, and to whom they are owed.
2. Complete required bankruptcy forms and file them at your nearest Federal court.
3. The individual is then protected from their creditors by means of an “order of stay”, which prohibits any creditor from contacting the individual concerned.
4. Approximately one month later the court will notify the individual of the “341″ meeting that it is compulsory for you to attend. This gives the creditors the chance to check that you are unable to meet your debts to them, and are not merely trying to avoid payment. Once satisfied, the discharge will be approved.
5. This is where a Trustee is appointed to oversee the liquidation of the individal’s non exempt assets, which are duly sold.
6. After approximately 2 – 3 months the discharge is granted by the court and a discharge notice issued.
7. With the exception of non-exempt debt, there is no further liability for any debt on behalf of the individual after the discharge notice is granted.
Individuals are granted a Chapter 7 discharge in 99% of cases.
In some cases a discharge under the chapter 7 bankruptcy laws will not be granted, this can be for the following reasons:
1. The individual did not provide accurate accounts.
2. The individual tried to hide personal assets from the court.
3. The individual was seeking bankruptcy under criminal circumstances.
4. The individual broke a bankruptcy court order
5. Estate property was transferred, hidden or destroyed by the individual.
After notice of discharge has been issued, if it is discovered that property had been hidden, transferred or destroyed, the notice of discharge will be revoked.
However, it is possible to retain certain types of property, perhaps a classic car for example, under “reaffirmation”.
This simply means that a written agreement is made and filed with the court, in which the seller and debtor agree that the item may be kept as long as repayment s are maintained.
The two main alternatives to chapter 7 bankruptcy are chapter 13 and to a lesser extent, chapter 11.
Chapter 11 is useful if you are in business and wish to avoid liquidation, while Chapter 13 allows you to retain your personal property.
Repayment of debt is still the leading principle of bankruptcy. Should it be decided via means testing that an individual can repay their debt over the longer term (3 – 5 years), they will be forced into a chapter 13 filing by the court.
If you need more free inIf you needmation on chapter 7 bankruptcy laws and other areas of bankruptcy, including rebuilding your creditworthiness after bankruptcy, go to www.howtoclaimbankruptcy.net. Free reprint avaialable from: Revealed – Chapter 7 Bankruptcy Laws.
Restoring Credit Rating Post Bankruptcy
The fact is, after bankruptcy life changes, and if you want to restore your financial position, there are certain strategies one can use to improve one’s credit rating, but these are greatly helped by including them as part of an overall strategy prior to filing chapter 7 bankruptcy.
Tip 1. Creditor’s Accounts.
It’s important that you understand how your credit score is compiled. It is not just a single agency that gives the rating, but data that the agency receives about your credit position from your creditors. This is analysed and your score worked out.
If you can persuade your creditors, and it doesn’t have to be all of them, to stop reporting your credit score with them to the credit agencies, which is perfectly legal, this will have a beneficial effect on your credit rating.
Tip 2. Your Plastic Cards.
You may be surprised to know that credit cards, used properly and paying the balance off each month can help improve your credit rating, because the powers that be see you acting responsibly. So, even if you have vowed never to use one again, it is in fact a good idea to try and get a credit card after bankruptcy.
Tip 3. Get a Secured Card.
A secured credit card is a credit card that is limited in its credit limit to an amount equal to a deposit with the card issuer. In other words, you give the issuer a deposit of say $200, and the limit on your card is $200. This may raise the question as to why not just have a $200 cash budget and no card.
Cash spending is not seen by the credit agencies. Credit card spending is, and if you pay the balance every month this will be seen as responsible spending, and your credit rating will improve. In addition, there is no danger of getting into credit card debt again as the maximum limit is covered by your deposit.
Just be certain that the card issuer is registered with the credit bureaux, otherwise the card will have no bearing on your credit score.
Tip 4. Get Included on a Friend’s Credit Card.
If you can persuade a relative or friend (with a good credit record) to add your name to their card, you will benefit from their history and this will improve your rating. The other person’s rating is not affected by your bankruptcy and you do not even have to use the card, it can be totally passive.
However, you will be affected by any lowering of the other person’s credit rating.
For many people however, harsh economic events have conspired to make repaying their debts impossible, and has left them considering how to claim bankruptcy. If you are in that situation and need more free advice, visit www.howtoclaimbankruptcy.net.