Chapter 7

Questions and Answers About Chapter 7 Bankruptcy

What is a chapter 7 bankruptcy case and how does it work?

A chapter 7 bankruptcy case is a proceeding under federal law in which the debtor seeks relief under chapter 7 of the Bankruptcy Code. Chapter 7 is that part (or chapter) of the Bankruptcy Code that deals with liquidation.

In a chapter 7 case, the debtor must turn his or her nonexempt property, if any exists, over to a trustee, who then converts the property to cash and pays the debtor’s creditors. In return, the debtor receives a chapter 7 discharge, if he or she pays the filing fee, is eligible for the discharge, and obeys the orders and rules of the bankruptcy court.

What is a chapter 7 discharge?

It is a court order releasing a debtor from all of his or her dischargeable debts and ordering the creditors not to attempt to collect them from the debtor. A debt that is discharged is a debt that the debtor is released from and does not have to pay.

How does a person obtain a chapter 7 discharge?

A chapter 7 discharge is obtained by filing and maintaining a chapter 7 bankruptcy case and being eligible for a chapter 7 discharge. However, not all debts are discharged by a chapter 7 discharge. Certain types of debts are by law not dischargeable under chapter 7 and debts of this type will not be discharged even if the debtor receives a chapter 7 discharge.

Who is permitted to file and maintain a chapter 7 case?

Any person who resides in, does business in, or has property in the United States is permitted to file a chapter 7 bankruptcy case except a person who has intentionally dismissed a prior bankruptcy case within the last 180 days. To be permitted to maintain a chapter 7 bankruptcy case a person must qualify for chapter 7 relief under a process called the Means Testing.

What is the Means Test?

Means testing is a method of determining a person’s eligibility to maintain a chapter 7 case. Under the means test a person whose current monthly income from all sources multiplied by12 exceeds the median annual income, as reported by the U.S. Census Bureau, for the person’s state and family size. In some circumstances actual expenses, for example, may not be “permitted” expenses.  Reviewing income and expenses, (allowable and actual expenses) most often requires a detailed legal analysis.  The Law Office of John A. Vos is well-versed in assisting clients with a Means Test Evaluation. There is a legal presumption that a chapter 7 case of a person whose disposable monthly income is such that he or she is deemed to be able to pay $100 per month or more to unsecured creditors for 60 months will be dismissed or converted to chapter 13 unless special circumstances exist.

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