Chapter 7 Bankruptcy Information: Find Out If It's Your Best Option

By: Benjamin E. Hertz|LRL Editor

A slowdown in the economy is a strong financial punch to the stomach not only for the average person, but also for businesses of all sizes. Bankruptcy is widely considered to be the last step an individual should consider. However, if you are looking for Chapter 7 bankruptcy information and believe bankruptcy is your last feasible option to avoid complete financial ruin, then make sure you educate yourself on a few pertinent details.

What exactly is Chapter 7 bankruptcy and how does it help those who are in financial trouble? Chapter 7 bankruptcy, also called straight bankruptcy option or liquidation, entails conversion of your remaining assets into cash to pay off creditors. This is an efficient way to start anew, but it does carry strong risks: it severely damages your credit and presents obstacles to obtaining lending for many years. Corporations, partnerships and individuals can file for Chapter 7 bankruptcy. For the liquidation process, the court will appoint a trustee to handle the collection and the selling of your assets. It will be the trustee's job to pay off your creditors using the money that came from the liquidation.

Credit counseling is additional Chapter 7 bankruptcy information you should understand. All applicants seeking Chapter 7 must undergo credit counseling. This should be pre-approved by the court and the required 180 hours should be done before even filing the Chapter 7 application. In rare cases, when credit counseling is not available in your area, the debt management plan is the alternative course of action. This, too, should be pre-approved and filed with the court.

You should also consider the costs. Be prepared to pay for the filing in addition to the fees you may owe your bankruptcy attorney. The fees can be paid in full or partially for a maximum of four installments as long as full payment is made 120 days after the filing of the petition. There are cases when the court can waive the fees if and only if the debtor has an income of 150% under the poverty level.

Before filing, you must prepare documentation as proof of your debt and inability to pay. List of creditors, claim amounts, monthly and yearly income and a list of your monthly expenses are just some of the documents you need to file.

Perhaps the most important Chapter 7 bankruptcy information you should have is finding a reputable bankruptcy attorney who understands your concerns and who is not more concerned about attorney fees than your own financial plight. Ask for referrals among your peers so you are sure to get a reliable one. A good attorney will explain the whole process, and will recommend whether bankruptcy is your best option.

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