Bankruptcy Filing for Chapter 7
If you owe money, or if someone claims you owe money even when you don't, you are considered a debtor by the Code. All companies, plaintiffs and individuals who want you to pay money are considered creditors. In the most basic sense, the Code provides a legal process for debtors and creditors to meet, with court supervision, to potentially resolve all existing claims and debts. Filing is not for everyone, yet does provide many debtors an effective means of eliminating debt and avoiding financial crisis.
Ordinarily, when people refer to filing, they think of a bankruptcy filing for Chapter 7. In reality, there are five different Chapters within the Code that provide a uniquely different purpose and administration of the estate. Most consumers file either Chapter 7 or Chapter 13. These Chapters are specifically designed to provide a more simple legal process for administering nearly 4 million cases a year through the US Court system. In an ordinary cases, Chapter 7 requires approximately 90 days to receive a discharge of all debts, beginning from the say the original petition is filed, until the final order for relief is granted by the Court. This "discharge" wipes out debts as if they never existed, and creditors are prohibited from claiming the debt, attempting to collect the debt, or reporting the debt as unpaid to any third party.
A bankruptcy filing for Chapter 7 must be qualified
The Code, and especially qualification for Chapter 7, were extensively revised by the new law Reform Act of 2005. These amendments require all debtors to pass a series of tests before qualifying for a Chapter 7 discharge. As a starting point, no debtor may file Chapter 7 if earning more than the state median income. Also, no debtor may File Chapter 7 if earning more than $166 above a statutory standard for basic living expenses, regardless of the amount of debts owed. Others tests are also provided with the Congressional intent of forcing almost all individual debtors into Chapter 13 plans, under court supervision, for a period of five years.
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