Common questions that come up when it comes to chapter 7 bankruptcy are, “how many years chapter 7 takes to repay?” and “am I eligible to file chapter 7?” Chapter 7 bankruptcy is a type of bankruptcy where an individual gets to file for a petition with the help of a bankruptcy lawyer to clear off a variety of unsecured debts they may have taken and are now unable to pay up. Unlike in chapter 13 bankruptcy where a repayment plan is usually set up for the individual to pay creditors, chapter 7 bankruptcy entails the selling of an individual’s non-exempt assets and the proceeds from it used to pay their creditors.
To qualify for a chapter 7 bankruptcy, you will need to provide proof that you have a low income. If you have a high income, the court considers the amount subtracted to cater to your expenses. If the remainder of your income amount is not enough to repay your creditors, you are eligible to file for chapter 7 bankruptcy. While there is a possibility of amending chapter 7 after discharge, it is a more complex procedure than when you first started.
It’s important to research which type of bankruptcy is ideal for you and what happens after bankruptcy chapter 7. Filing for bankruptcy is an extensive process and as such, you should seek the services of a lawyer specializing in bankruptcy law.
If you’re in financial trouble, bankruptcy can provide some relief. However, it is a complicated process that will have consequences for your future, so you want to be sure you make the right decisions. This is why bankruptcy attorneys are so important. With knowledge about all types of bankruptcies, they can make sure that you choose the right type for your situation. If you were to make a mistake with your application, you might get rejected or face a harsher penalty than necessary. With your lawyer, you’ll have access to bankruptcy court with an expert to steer you through it.
While you might think a lawyer is an unnecessary expense, they can actually save3 you money. By explaining the advantages and disadvantages of filing bankruptcy, your attorney can make sure that it is right for you. They have experience with active bankruptcies while you might be going through this process for the first time. Trust your lawyer’s judgment and make sure that you choose the right type of bankruptcy. That way, you won’t delay the process or cause further problems.
Bankruptcy court is where individuals or entities go when they no longer have the assets to pay off their debts, or at least cannot do so in a timely way. When it comes to businesses, there are two options for walking into bankruptcy court: Chapter 11 and Chapter 7. Chapter 7 bankruptcy is by far the more common and involves liquidating the company, while Chapter 11 is primarily a form of reorganization.
Bankruptcy Court: Who is Involved?
When a company is unable to pay back creditors and things cannot be worked out, bankruptcy court is where everything will be settled. In a Chapter 7 case, a ruling judge presides over the bankruptcy court, while a representative from the Department of Justice also attends to keep things moving. There is also another trustee appointed to oversee the business’ liquidation. The company that files in bankruptcy court is the debtor, and there can be many creditors who are owed money. Typically, creditors are considered secured, priority, or unsecured. Secured creditors such as banks are paid off first as company assets are liquidated, while unsecured creditors, such as suppliers, may or may not ever see a dime. Priority creditors are usually company employees or government entities owed tax, and they fall somewhere in between.
How Does Chapter 7 Get Started?
The debtor company has to file in bankruptcy court. They file a petition for bankruptcy and give a list of all their creditors. As soon as they do, they must stop functioning as a company. All keys to offices, warehouses, company vehicles, or any other property are handed over the trustee. The trustee takes over operations in a very limited way, primarily to get it ready for an orderly liquidation and to look for any potential lawsuits. The trustee also looks for any assets the owner may have tried to hide and transfers them back to the company to be used in paying creditors.
What Happens Next?
Within 15 days of the filing, the debtor company must also file a Schedules and Statement of Financial Affairs. This filing shows the complete financial state of the company as of the day of filing, as well as historical operations. It also lists everything that has been paid to company owners and other insiders within the last year. Then the principal of the company is interviewed by the trustee, under oath. This interview takes place at the Office of the U.S. Trustee and is free for anyone to attend. All creditors are free to ask questions. This is the start of an investigation that typically takes a few months. During that time, the trustee looks for any evidence of impropriety, and, assuming nothing is found, a final report gets filed.
How do Creditors Get Paid?
All creditors file a proof of claim about the amount they think they should get, and in almost all cases creditors get back only a small fraction of that amount. The trustee will look over these filings, and if he or she belivies the creditor is not due so much an objection is filed and the judge decides the proper amount of the claim. All assets are reduced to cash through the sale of buildings and other real property, as well as the prosecution of any lawsuits. In a typical case, most unsecured creditors will receive nothing, and if they were paid by the company before the filing, they may be sued by the trustee to recover that money so it can be given to secured creditors and priority creditors.
Bankruptcy court and bankruptcy filings can be long and arduous. There are typically many creditors claiming assets, and there may be inappropriate or even criminal behavior on the part of owners attempting to protect or even enhance their personal assets. Most creditors know little about bankruptcy law and are wise to get a legal help in prosecuting any claims.