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The Bankruptcy that Erases Too Much Debt: Escape Debt by Filing for Liquidation Bankruptcy Chapter 7

JaLeanna | Sep 13, 2010 |

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A financial crisis can cause a lot of problems when it is time for debt repayment. Among the two types of bankruptcy, chapter 7 bankruptcy is the best way to eliminate debt. You can eliminate all kinds of unsecured debt after a 341 meeting in a period of 4 months or 60 days by opting liquidation bankruptcy. The change in the laws since 2005 has made the process more complex but the number of Americans filing for bankruptcy has not been affected.Eligibility Criteria for Escaping Debt with Chapter 7 or Liquidation Bankruptcy• A Chapter 7 bankruptcy can only be filed if the person in question has not filed one in the last 8 years. This is not the same case with chapter 13; the chapter 13 bankruptcy involves paying the amount as installments in 3 to 5 years.• There are several criteria that need to be met before you can file a Chapter 7 bankruptcy. The family income must be below the average household income in the state you reside. You can consult your attorney for ways to legally reduce the family income if you don't comply with this rule.• Any asset that belongs to you, including a holiday home or sports car are required to be handed over to a trustee appointed by the court. The bankruptcy rules stipulates that any such valuable need to be realized so that it can be distributed top the creditors.Escape Debt That is Unsecured By Filing for Chapter 7 Bankruptcy

The rule governing any credit without collateral allows for the debt to be discharged if bankruptcy has been declared. The rule covers debts ranging from credit card, payday advances, unsecured loans, repossession deficiencies and even IRS income tax but subject to certain conditions.

You must request for a copy of your credit report once all the debts have been discharged. If you find any discrepancies, such as an active status of a discharged debt, then you must address the mistake immediately.Cannot Escape from Debt That's Ineligible Under Section 523(a) of the Bankruptcy Code

Bankruptcy and liquidation does not resolve all your debt problems. There are debts which cannot be eliminated legally; these debts are specified in the bankruptcy code section 523(a). Some of such debts are alimony, student loan, child support, divorce settlements, almost all IRS taxes excluding income tax and debt resulting from recklessness, fraud or any malicious acts.Is Bankruptcy and Liquidation the Right Option?

You must assess your financial situation thoroughly before deciding on bankruptcy as the best way to escape your debts. Find out the benefits you can get and if the new rules make you ineligible. In case you are not eligible or your debts are all secured then filing for bankruptcy may not be to your advantage. Your attorney can help you decide what the legal solution you can use is; you could also look for other alternatives before proceeding to file bankruptcy.

Sources:
"Bankruptcy statistics." US Courts.
"Discharge in bankruptcy." US Courts.