Chapter 7 Individual Insolvency
Chapter 7 bankruptcy allows individuals to have certain debts discharged if they satisfy the necessary criteria. BACCPA (2005) established these requirements, which now include both a means test and the requirement to receive credit counseling.
Before being granted Chapter 7 bankruptcy, a person must demonstrate that their disposable income falls below a certain threshold, which varies slightly from state to state based on the average income in that state.
Additionally, the individual must have received credit counseling from an accredited organization within the 180 days prior to filing for bankruptcy.
Under Chapter 7, certain assets can be retained, while others must be liquidated to repay a portion of the debt.
Additionally, some debts cannot be discharged under Chapter 7. These would include child support, property taxes, three-year-old income taxes, student loans, and sanctions.
Chapter 7 Bankruptcy For Businesses
A business may petition for Chapter 7 bankruptcy if it is heavily indebted and unable to service this debt with its current income.
The appointment of a Chapter 7 trustee generally results in the cessation of operations. At this juncture, they have several choices. The most common of these is to simply take account of the business's assets and sell them in an effort to pay off the debts owed to creditors.
The second option primarily applies to larger organizations. Individual divisions of the business may be sold to other businesses to help pay off debts, if feasible.
In a Chapter 7 business bankruptcy, the debt is not discharged. Instead, the company is liquidated.
It is advised that anyone filing for Chapter 7 bankruptcy obtain legal representation. A provision of this type of bankruptcy states that your petition will be automatically denied if it has been denied within the previous 180 days. This essentially means that if your application is rejected due to inadequate case preparation, you will not be able to reapply for six months.
And if you are in financial difficulty, waiting this long may be too late; therefore, it is crucial that you get it right the first time.""
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