Declaring bankruptcy is not something that is to be taken lightly. Most people know it that it will have a long term affect on their future credit but other than that many do not understand the different types of bankruptcy that are available to them.
By far the most common type of bankruptcy filed is Chapter 7. Chapter 7 is often referred to as “liquidation bankruptcy” as it involves the sale of all the non-exempt assets of the debtor. The asset sale is handled by a court appointed trustee. All the money that results from the sale of these assets is then dedicated to paying the creditors, after which the debts are absolved. There are certain debts such as taxes, student loans and child support that are not affected by bankruptcy, the debt must be paid.
Prior to filing for any bankruptcy a debtor should hire a qualified bankruptcy attorney in Salt Lake City, the attorney will guide, advise and work with the client; gathering all the records and documents that are necessary to file the petition for Chapter 7. As well as petitioning the court, the debtor must provide the court with a financial statement which fully discloses the balance of any bank accounts, credit card debt, available loan documents and proof of income. These documents are absolutely necessary as the court demands proof that the actual financial situation is the same as that included in the bankruptcy petition.
As well as opening all the financial records of the debtor to the court, the individual declaring Chapter 7 bankruptcy will be obliged to take a means test. This test determines if you are in a position to pay your debts or not. Using evidence of income over the last six months, the test annualizes your real income; it then compares your average annual income to the median income where you live. If you fail to pass the means test, filing Chapter 7 becomes difficult.
If the means test results show that the debtor can file for Chapter 7, the court sets a meeting with all the creditors. During this meeting the debtor, who is accompanied by his bankruptcy attorney in Salt Lake City confirms under oath that all the information given to the court is true and accurate. The creditors can use this opportunity to question the debtor if they are so inclined.
Once the non-exempt assets have been seized and disposed of and the proceeds distributed as agreed, the court will discharge the debtor. This discharge prevents any creditor from attempting to collect anything else from the bankrupt; the discharge is tantamount to wiping the slate clean, allowing the individual to restart his or her life.
