How Does Chapter 7 Bankruptcy Work?

People who are in debt may need to consider bankruptcy. Chapter 7 bankruptcy can be a way to get a fresh start. This is also known as liquidation bankruptcy. In this case, the debtor’s assets will be sold to pay creditors.

How does Chapter 7 Bankruptcy work?

Chapter 7 bankruptcy is the most popular type of bankruptcy in America. Chapter 7 bankruptcy sees the trustee sell the debtor’s assets that are not exempt and use the proceeds to pay creditors. The trustee then pays creditors any remaining debts.

The means test is required in order to be eligible for Chapter 7 bankruptcy. This test examines the debtor’s income, expenses, and financial situation to determine if they are able to pay off their debts. The debtor will automatically be eligible if their income is lower than the state’s median income. To determine if they are eligible, they will need more details about their expenses if their income exceeds the median.

After filing for Chapter 7 bankruptcy, the debtor will need to attend a meeting with creditors. This meeting is also known as the 341 meeting. The trustee will be asking the debtor about assets and debts at this meeting. This meeting may be attended by creditors who can ask questions of the debtor.

The trustee will then sell the non-exempt assets of the debtor and use the proceeds for creditors. The trustee will then pay off any remaining debt. This debtor is no longer responsible for paying it back.

Chapter 7 bankruptcy can be complicated. Before you make any decisions, it is important to fully understand the process. To learn more about your options, consult an experienced bankruptcy attorney.

People who are in debt may need to file for bankruptcy. Chapter 7 bankruptcy is a liquidation bankruptcy. This means that the debtor’s assets will be sold to pay creditors. This process can be complicated and it is important to understand it and consult an experienced bankruptcy attorney before you make any decisions.

This post was written by Trey Wright, a lawyer with extensive experience as a Florida bankruptcy lawyer! Trey is one of the founding partners of Bruner Wright, P.A. Attorneys at Law, specializing in bankruptcy law, estate planning, and business litigation.

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