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byAlma Abell

When most people think of the word “bankruptcy”, they think of a Chapter 7 personal bankruptcy filing. Under Chapter 7, most of the filer’s debts are eliminated, but they have to surrender some of their assets in order to pay those debts. Read on to learn more about this commonly used chapter of bankruptcy.

Criteria for Chapter 7 Personal Bankruptcy

Under changes to US bankruptcy law, a two-part means test is used to determine if a person is eligible for Chapter 7. Those parts are as follows:

* Ability to repay -; The court plugs the debtor’s income into a formula that excludes necessary expenditures such as rent and food, and determines whether the person can repay at least ¼ of his or her unsecured non-priority debt.

* Comparison to the state’s median income -; The filer’s income is compared to the median in the state. If the person earns more than the median and can pay back 25% of his or her debt as mentioned above, they are ineligible for Chapter 7 and must use Chapter 13 instead.

During the six months before filing, the debtor must consult a credit counselor and attend money management courses to earn a debt discharge. Most filers also consider hiring a Chapter 7 Attorney in Oak Park IL during this time.

Automatic Stays

Once a person files for Chapter 7 bankruptcy, their estate is under an automatic stay, which legally prevents creditors from engaging in further collection attempts without the court’s permission. The stay provides protection from repossession, foreclosure, eviction, wage garnishment and utility shutoff.

The Bankruptcy Process

During a Chapter 7 case, the court will appoint a trustee to work on your estate. The trustee’s job is to ensure that your creditors receive as much as they can get; the more assets the trustee can recover, the more creditors get. The trustee reviews paperwork filed with the court, and asks the debtor questions about his or her assets during a creditors’ meeting.

After the meeting, assets are classified as exempt or non-exempt, and the latter are liquidated. Once the trustee has disbursed the proceeds of the sale of the debtor’s assets, most of the leftover unsecured debt is discharged. The Chapter 7 process usually takes about six months to finish. A Chapter 7 Attorney in Oak Park IL with can recommend the right bankruptcy chapter for your situation.