Chapter 7 – Bankruptcy

Chapter 7 – Bankruptcy Basics

This chapter of the Bankruptcy Code provides for “liquidation” – the sale of a debtor’s nonexempt property and the distribution of the proceeds to creditors.

{{Debtors|Borrowers} {should|ought to|must|need to} {be {aware|conscious|mindful}|understand|know|realize} that there are {several|a number of|numerous} {alternatives|options|choices} to {chapter|phase} 7 {relief|alleviation}. {For {example|instance}|For instance|As an example}, {debtors|borrowers} {who|that} are {{engaged|involved} in|participated in|taken part in} {business|company|service|organisation}, {including|consisting of} {corporations|companies|firms}, {partnerships|collaborations}, {and|as well as|and also} {sole|single} proprietorships, {may|might} {prefer|choose|like|favor} to {remain|stay|continue to be} in {business|company|service|organisation} {and|as well as|and also} {avoid|prevent|stay clear of} liquidation. Such {debtors|borrowers} {should|ought to|must|need to} {consider|think about|take into consideration} {filing|submitting} {a petition|a request|an application} under {chapter|phase} 11 of the Bankruptcy Code. Under {chapter|phase} 11, the {debtor|borrower} {may|might} {seek|look for} {an adjustment|a modification|a change} of {debts|financial obligations|financial debts}, either by {reducing|decreasing|minimizing|lowering} the {debt|financial obligation|financial debt} or by {extending|prolonging|expanding} {the time|the moment} for {repayment|payment|settlement} or {may|might} {seek|look for} {a more|a much more|an extra} {comprehensive|extensive|detailed|thorough} {reorganization|reconstruction}. Sole proprietorships {may|might} {also|likewise|additionally} be {eligible|qualified} for {relief|alleviation} under {chapter|phase} 13 of the Bankruptcy Code.|Such {debtors|borrowers} {should|ought to|must|need to} {consider|think about|take into consideration} {filing|submitting} {a petition|a request|an application} under {chapter|phase} 11 of the Bankruptcy Code. Under {chapter|phase} 11, the {debtor|borrower} {may|might} {seek|look for} {an adjustment|a modification|a change} of {debts|financial obligations|financial debts}, either by {reducing|decreasing|minimizing|lowering} the {debt|financial obligation|financial debt} or by {extending|prolonging|expanding} the time for {repayment|payment|settlement} or {may|might} {seek|look for} {a more|a much more|an extra} {comprehensive|extensive|detailed|thorough} {reorganization|reconstruction}.}

In addition, individual debtors who have regular income may seek an adjustment of debts under chapter 13 of the Bankruptcy Code. A particular advantage of chapter 13 is that it provides individual debtors with an opportunity to save their homes from foreclosure by allowing them to “catch up” past due payments through a payment plan. Moreover, the court may dismiss a chapter 7 case filed by an individual whose debts are primarily consumer rather than business debts if the court finds that the granting of relief would be an abuse of chapter 7. 11 U.S.C. § 707(b).

If the debtor’s “current monthly income” (1) is more than the state median, the Bankruptcy Code requires an application of a “means test” to determine whether the chapter 7 filing is presumptively abusive. Abuse is presumed if the debtor’s aggregate current monthly income over 5 years, net of certain statutorily allowed expenses, is more than (i) $12,850, or (ii) 25% of the debtor’s nonpriority unsecured debt, as long as that amount is at least $7,700. (2) The debtor may rebut a presumption of abuse only by a showing of special circumstances that justify additional expenses or adjustments of current monthly income. Unless the debtor overcomes the presumption of abuse, the case will generally be converted to chapter 13 (with the debtor’s consent) or will be dismissed. 11 U.S.C. § 707(b)(1).

Debtors should also be aware that out-of-court agreements with creditors or debt counseling services may provide an alternative to a bankruptcy filing.

Chapter 7 Eligibility

{To {{qualify|certify} for|get approved for|receive|get} {relief|alleviation} under {chapter|phase} 7 of the Bankruptcy Code, the {debtor|borrower} {may|might} be {an individual|a private|a specific}, {a partnership|a collaboration}, or {a corporation|a company|a firm} or {other|various other} {business|company|service|organisation} entity. 11 U.S.C. § § 101( 41 ), 109(b). {{Subject|Topic} to|Based on} the {means|ways|methods} {test|examination} {described|explained|defined} {above|over} for {individual|private|specific} {debtors|borrowers}, {relief|alleviation} is {available|offered|readily available} under {chapter|phase} 7 irrespective of the {amount|quantity} of the {debtor|borrower}’s {debts|financial obligations|financial debts} or whether the {debtor|borrower} is solvent or {insolvent|financially troubled|bankrupt}. {An individual|A person} can not {file|submit} under {chapter|phase} 7 or {any|any type of|any kind of} {other|various other} {chapter|phase}, {however|nevertheless|nonetheless}, if {during|throughout} the {preceding|coming before} 180 days {a prior|a previous} {bankruptcy|insolvency|personal bankruptcy} {petition|request|application} was {dismissed|rejected|disregarded} {due to|because of|as a result of} the {debtor|borrower}’s {willful|unyielding} {failure|failing} to {appear|show up} {{before|prior to} the court|on trial} or {{comply|conform|abide} with|adhere to|abide by|follow} orders of the court, or the {debtor|borrower} {voluntarily|willingly} {dismissed|rejected|disregarded} the previous {case|situation|instance} after {creditors|lenders|financial institutions} {sought|looked for} {{relief|alleviation} from|remedy for} the {bankruptcy|insolvency|personal bankruptcy} court to {recover|recuperate|recoup} {property|residential or commercial property|home|residential property|building} {upon which|whereupon} they hold liens. 11 U.S.C. § § 109(g), 362(d) {and|as well as|and also} (e). {In {addition|enhancement}|Additionally|Furthermore|On top of that}, no {individual|person} {may|might} be {a debtor|a borrower} under {chapter|phase} 7 or {any|any type of|any kind of} {chapter|phase} of the Bankruptcy Code unless {he or she|she or he} has, within 180 days {before|prior to} {filing|declaring}, {received|got|obtained} {credit|credit rating|credit scores|credit history|credit report|credit score|debt} {counseling|therapy} from {an approved|an authorized|an accepted} {credit|credit rating|credit scores|credit history|credit report|credit score|debt} {counseling|therapy} {agency|company|firm} either in {an individual|a private|a specific} or {group|team} {briefing|rundown|instruction}. 11 U.S.C. § § 109, 111. There are {exceptions|exemptions} in {emergency|emergency situation} {situations|circumstances|scenarios} or where the U.S. trustee (or {bankruptcy|insolvency|personal bankruptcy} {administrator|manager}) {has|has actually} {determined|identified|figured out|established} that there {are {insufficient|inadequate|not enough}|want} {approved|authorized|accepted} {agencies|companies|firms} to {provide|offer|supply|give} the {required|needed|called for} {counseling|therapy}. If {a debt|a financial obligation|a financial debt} {management|administration|monitoring} {plan|strategy} is {developed|established|created} {during|throughout} {required|needed|called for} {credit|credit rating|credit scores|credit history|credit report|credit score|debt} {counseling|therapy}, it {must|should|needs to|has to} be {filed|submitted} with the court.|{Subject|Topic} to the {means|ways|methods} {test|examination} {described|explained|defined} {above|over} for {individual|private|specific} {debtors|borrowers}, {relief|alleviation} is {available|offered|readily available} under {chapter|phase} 7 irrespective of the {amount|quantity} of the {debtor|borrower}’s {debts|financial obligations|financial debts} or whether the {debtor|borrower} is solvent or {insolvent|financially troubled|bankrupt}. {An individual|A person} can not {file|submit} under {chapter|phase} 7 or {any|any type of|any kind of} {other|various other} {chapter|phase}, {however|nevertheless|nonetheless}, if {during|throughout} the {preceding|coming before} 180 days {a prior|a previous} {bankruptcy|insolvency|personal bankruptcy} {petition|request|application} was {dismissed|rejected|disregarded} due to the {debtor|borrower}’s {willful|unyielding} {failure|failing} to {appear|show up} {before|prior to} the court or {comply|conform|abide} with orders of the court, or the {debtor|borrower} {voluntarily|willingly} {dismissed|rejected|disregarded} the previous {case|situation|instance} after {creditors|lenders|financial institutions} {sought|looked for} {relief|alleviation} from the {bankruptcy|insolvency|personal bankruptcy} court to {recover|recuperate|recoup} {property|residential or commercial property|home|residential property|building} upon which they hold liens. In {addition|enhancement}, no {individual|person} {may|might} be {a debtor|a borrower} under {chapter|phase} 7 or {any|any type of|any kind of} {chapter|phase} of the Bankruptcy Code unless he or she has, within 180 days {before|prior to} {filing|declaring}, {received|got|obtained} {credit|credit rating|credit scores|credit history|credit report|credit score|debt} {counseling|therapy} from {an approved|an authorized|an accepted} {credit|credit rating|credit scores|credit history|credit report|credit score|debt} {counseling|therapy} {agency|company|firm} either in {an individual|a private|a specific} or {group|team} {briefing|rundown|instruction}.}

{{One of|Among} the {primary|main|key} {purposes|functions|objectives} of {bankruptcy|insolvency|personal bankruptcy} is to {discharge|release} {certain|specific|particular} {debts|financial obligations|financial debts} to {give|provide|offer} {an honest|a truthful|a sincere|a straightforward} {individual|private|specific} {debtor|borrower} a “{fresh {start|begin|beginning}|clean slate|new beginning}.” The {debtor|borrower} has no {liability|obligation|responsibility} for {discharged|released} {debts|financial obligations|financial debts}. In {a chapter|a phase} 7 {case|situation|instance}, {however|nevertheless|nonetheless}, a discharge is {only|just} {available|offered|readily available} to {individual|private|specific} {debtors|borrowers}, not to {partnerships|collaborations} or {corporations|companies|firms}. 11 U.S.C. § 727(a)( 1 ). Although {an individual|a private|a specific} {chapter|phase} 7 {case|situation|instance} {usually|typically|normally|generally} {results in|leads to|causes} a discharge of {debts|financial obligations|financial debts}, the right to a discharge is not {absolute|outright}, {and|as well as|and also} some {{types|kinds} of|kinds of|sorts of} {debts|financial obligations|financial debts} are not {discharged|released}. {Moreover|Furthermore|Additionally|In addition}, {a bankruptcy|an insolvency|a personal bankruptcy} discharge does not {extinguish|snuff out} a lien on {property|residential or commercial property|home|residential property|building}.|The {debtor|borrower} has no {liability|obligation|responsibility} for {discharged|released} {debts|financial obligations|financial debts}. In {a chapter|a phase} 7 {case|situation|instance}, {however|nevertheless|nonetheless}, a discharge is {only|just} {available|offered|readily available} to {individual|private|specific} {debtors|borrowers}, not to {partnerships|collaborations} or {corporations|companies|firms}. {An individual|A private|A specific} {chapter|phase} 7 {case|situation|instance} {usually|typically|normally|generally} results in a discharge of {debts|financial obligations|financial debts}, the right to a discharge is not {absolute|outright}, {and|as well as|and also} some {types|kinds} of {debts|financial obligations|financial debts} are not {discharged|released}.}

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