Legal Information what you should know before Filing Chapter 7 Bankruptcy

(500 Words)
Filing for chapter 7 bankruptcy is a big decision, and you want to be fully informed before making this decision. Chapter 7 bankruptcy is also known as straight bankruptcy or liquidation and allows you to exempt property (subject to limitations) and get some of the debt discharged by the proceedings. Other assets may be sold to repay creditors. You should fully understand the process before you move in this direction.
Before one files for chapter 7 bankruptcy, they should understand that it can be challenged and they may have no choice but to do Chapter 13 instead. There have been many cases of abuse of the chapter 7 bankruptcy filing, so the United States Trustee will now look very closely to see if this is happening. One factor that is considered is whether the debtor could use disposable income to repay some or all of the debts within five years. This will depend on their income, the amount of their debts and other factors. If so, a discharge under Chapter 7 may not be available.
Individuals should consider that their credit score will be affected by a chapter 7 bankruptcy filing. A chapter 7 bankruptcy filing stays on a credit report for 10 years, which is 3 years more than the chapter 13 bankruptcy. It will often lower their credit rating, and a lot of lenders will not want to provide credit to someone with this filing. This can affect you when you apply for credit cards or look to buy a house, car or other item. Some employers even check credit history, so this can even affect a job search. Of course, your credit score may be very poor now anyways with all of that debt. The removal of the debt will be a positive thing on your credit score, so how exactly your credit score will respond is not completely known.
According to www.bankruptcyhome.com, individuals also need to understand that they will not be able to discharge every debt that they have. There are many exemptions. These include most liens, child support, recent income tax (under 3 years), fines and restitutions triggered by crimes, spousal support, most student loans and more. Also there are limits on the value of property that can be exempted. This number depends on the state.
Businesses can also file for chapter 7 bankruptcy and can even be forced into it. Businesses should understand that the entity as a whole will generally stop functioning, and employees may or may not face termination. Jobs may be saved if whole parts are sold off to other entities. Assets are sold through the use of a Chapter 7 trustee, and the creditors are paid back. Businesses should understand that a bankruptcy discharge does not occur for businesses like it can for individuals with this type of filing.
Chapter 7 bankruptcy is a logical option for many individuals and businesses. Anyone considering it should do research into their particular situation to decide whether it is right for them.