For those who meet the eligibility requirements, Chapter 7 bankruptcy may provide debt relief through the liquidation of property and discharge of debts.
For any number of reasons, people throughout Connecticut may find themselves struggling to pay their bills each month. As a result of their financial problems, some may decide to file for Chapter 7 bankruptcy. According to the United States Bankruptcy Court for the District of Connecticut, there were more than 5,400 consumer Chapter 7 cases in 2014. It is important for people to understand how Chapter 7 bankruptcies work, in order to determine if it is the right option for their situation.
Chapter 7 bankruptcy is often referred to as the liquidation chapter. It generally allows people to quickly regain control of their finances. In general, people who file for Chapter 7 turn over their non-exempt property to an official known as the bankruptcy trustee. The trustee then sells that property and applies the proceeds towards the filer’s debts. Often, certain debts, or portions of debts, may be discharged in these cases.
Eligibility and qualifications
With few exceptions, those who wish to file for Chapter 7 bankruptcy must meet certain qualifications. First, people are subject to the means test. The test is a formula that determines eligibility based on people’s average monthly income compared to the state’s median income, and their disposable income. Furthermore, people generally must have completed credit counseling with an approved agency within 180 days before filing, according to the U.S. Courts.
Additionally, there are qualification requirements pertaining to prior bankruptcy filings. In general, people cannot file for Chapter 7 if they have had a previous petition dismissed for certain reasons. Those whose filings were dismissed as a result of their intentional failure to comply with court orders or appear before the court are generally ineligible. People who voluntarily dismissed a previous case following attempts by creditors to recover property that they have liens on may also be unable to file for Chapter 7.
How does it work?
In general, Chapter 7 cases are started when people file a petition for bankruptcy with the court. These petitions must generally include various schedules and statements, including a list of people’s creditors and the nature and amount of their claims, a list of all their property, a detailed account of their monthly living expenses and the source, frequency and amount of their income. Additionally, they must include a certificate of credit counseling.
After the petition has been filed, most collection actions are automatically stayed. The bankruptcy trustee holds a meeting of the creditors, which the people filing must attend. During these meetings, those filing are placed under oath and may be questioned by their trustee and creditors to determine their ability to pay. Creditors may also decide during these meetings whether to discharge certain debts. During the process, any non-exempt property is generally turned over to the trustee, liquidated and the proceeds are applied toward the filer’s debts.
Working with an attorney
Filing for Chapter 7 bankruptcy may help some in Connecticut who are facing financial challenges to achieve a fresh start. However, the process can be complicated. As such, it may benefit those who are struggling with debt to seek legal counsel and representation. An attorney may help them to understand their options and determine which is best suited for their needs.