Filing Personal Bankruptcy Help

An individual or business can apply for chapter 7 bankruptcy, subject to a means test. However, whilst bankruptcy offers a way out of debt problems, it brings with it problems of its own, therefore sound financial advice should be sought before proceeding.

Business is often about taking calculated risks, Unfortunately, sometimes the calculations prove to have been flawed, resulting in economic difficulties, and ultimately, bankruptcy.

The rules for chapter 7 bankruptcy are common to both a business and an individual. Chapter 7 is probably the most popular form of bankruptcy, offering as it does a clean slate financially.

The Bankruptcy Abuse Prevention and Consumer Protection Act introduced in 2005, aims to protect creditors, by ensuring that their outstanding debts are repaid as far as possible. The fact is, chapter 7 provides for liquidation of an individual’s or company’s assets, and appropriation of the proceeds to the creditors. Any debts that remain outstanding after all the sale proceeds have been allocated are written off, leaving those to whom money is still owed out of pocket.

Therefore the law provides for a compulsory means test, so that the applicant for chapter 7 has to prove that they can no longer afford to continue in business or employment. In other words, if the bankruptcy court discovers that with a structured financial plan (the repayment plan), the applicant could in fact, over time, continue in work or business and repay all of his debts, chapter 7 will not be granted. Instead, a chapter 13 bankruptcy, where a strict repayment plan is worked out by the court, will be enforced. In this case, no assets are sold.

However, should it be found that the applicant for chapter 7 cannot afford to repay their debts over time, chapter 7 will be granted.

Where chapter 7 is granted, all assets are liquidated and the proceeds allocated to the various creditors. At the time the application is filed, the court will automatically grant “automatic stay”, which means no creditor may contact the debtor in pursuit of payment. This often comes as a relief to the applicant, who is then free from letters and calls from those to whom they owe money.

When a business has successfully filed under chapter 7, the trustee assumes the running of the business and the management board lose their jobs.

A chapter 7 bankruptcy stays on one’s credit report for 10 years.

There are a lot of things to consider when wondering how to claim bankruptcy. However, how to claim bankruptcy is very easy, but must only be thought of as an absolute last option. This article, Chapter 7 Bankruptcy is available for free reprint.

Related posts:

1. Some Facts Regarding Chapter 13 Bankruptcy
2. Should I Consider Chapter 13 Or Chapter 7 Bankruptcy?
3. Chapter 13 Bankruptcy – Reasons To File
4. The Means Test For Chapter 7
5. Chapter Seven Bankruptcy Laws Post 2005
6. Understanding Chapter 13 Bankruptcy
7. How To Claim Bankruptcy Post 2005
8. A Look At Chapter Seven Exemptions
9. What Is The Plan In A Chapter 13 Bankruptcy?
10. Chapter 7 Bankruptcy Law