by George Leard

Created on: July 26, 2010   Last Updated: July 27, 2010

What should you know before filing for Chapter 7 Bankruptcy?

 The ramifications of filing for Chapter 7 Bankruptcy are vital for anyone considering such a decision.

 Debtors should only consider making such a decision, if they have no hope of paying off their creditors based on their present incomes, and also if they are in danger of being sued.

It is also important for prospective applicants to know that they can file for Chapter 7 Bankruptcy and still be able to sell their assets and make payments to their creditors, under the supervision of the courts, thereby gradually retiring the debts.

 The lack of cosigners to any debt portfolio is a plus for debtors considering Chapter 7 Bankruptcy, because the suitors will not have alternative sources to approach for payments, in lieu of the principal debtor's financial incapacity.

 It is also important to know that once a debtor has already have other outstanding debts in collection, he or she has a good chance of being accepted for Chapter 7 Bankruptcy, because the debt load would be even greater, and increases his or her prospects.

 Historically, if the applicant has had precious bankruptcy applications dismissed, he or she will be more favorably considered, if a current one is made, especially if at least six months of credit counseling has been covered before the application.

 Candidates filing for chapter 7 Bankruptcy should know, that there is a $274 fee that goes with the application, and this can be paid immediately, or in four equal installments, or be waived, if they are financially unable to meet this requirement.

 According to Haman, no candidate filing for chapter 7v Bankruptcy if his or her income is above the median income for the people living in that specific state, or if the income is sufficient to pay off  at least 25% of the unsecured debt over a three to five years period at a rate of at least $100 per month. (Haman, E.A., 2006)

 In light of this, candidates should examine their financial status carefully before attempting to enter this area of bankruptcy, and in order to professionally get up to speed, they could employ an Accountant, who will help them to complete the Means Test, which according the Bankruptcy code changes in 2005, is a basic legal requirement expected of all applicants before admission.

 Under this code, unless the client shows that he or she has the financial means to discharge the debt load, he or she will not qualify for Chapter 7 Bankruptcy, but may be permitted to pursue Chapter 13, where other more appropriate arrangements can be made. (Haman, 2006) 

Applicants therefore, need to inform themselves of all these regulatory requirements well in advance of making the decision of whether or not to pursue this alternative, so that the future will have less negative implications, as they try to turn their situations around. In some case a Bankruptcy lawyer may be a viable choice in helping one to make the appropriate decision regarding taking Chapter 7 Bankruptcy.

 Reference

 1. www.mortgagefit.com, 07/26/10

 2.  Haman, Edward, A., 2006, The Complete Personal Bankruptcy Guide.

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