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An overview of Chapter 7 bankruptcy

For any number of reasons, people in Fort Lauderdale, and throughout Florida, may find themselves struggling with overwhelming debt. In order to regain control of their finances and achieve a fresh financial start, some may consider filing for chapter 7 bankruptcy. However, this is not the only option available. Thus, it behooves people who are thinking of taking this step to understand how chapter 7 bankruptcy works so they can determine if it is the right option for them.

Not everyone who is dealing with debt may file for chapter 7 bankruptcy. There are certain eligibility requirements that people must meet to qualify for this protection. According to the U.S. Courts, those seeking chapter 7 bankruptcy relief must complete credit counseling through an approved agency within 180 days of their filing. Additionally, they must qualify under the means test.

In order to file for chapter 7 bankruptcy, people cannot have had a prior bankruptcy petition dismissed within the preceding 180 days as a result of failing to comply with the court’s orders or for failing to appear before the court. Further, they may not qualify for chapter 7 bankruptcy if they voluntarily dismissed a prior case following efforts by their creditors to recover property for which they hold liens.

If people are eligible for chapter 7 bankruptcy, a trustee will be assigned to their cases. The trustee will hold a meeting of their creditors within 21 and 40 days of their petition filing. At this meeting, the trustee and creditors may ask people questions about their property and financial situations. Following the meeting, the trustee will report back to the court whether the case should be considered eligible.

When a chapter 7 bankruptcy case is commenced, the trustee is charged with liquidating the filer’s assets. The U.S. Courts points out that the trustee accomplishes this by selling certain nonexempt assets, provided they are free of liens or are worth more than the liens or security interest attached to the property. The funds obtained through the liquidation process are then applied toward people’s debts.

Sometimes, people may still have outstanding debts after their assets are liquidated. When their cases are concluded, they may receive a debt discharge for certain debts. According to the Internal Revenue Service, this action releases them from their personal liability for those debts. It is important to keep in mind, however, that not all debts are dischargeable.

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