Chapter 7 Bankruptcy: An Alternative For The Debtor
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With the options available to debtors for discharging debts, Chapter 7 bankruptcy is the most popular. The reason is that this form of bankruptcy provides no obligation to repay the debts that the debtor has accumulated. Until recently, it was much easier to have your debts erased through Chapter 7. However, new regulations and guidelines have made it much more difficult to have debts discharged without a plan for repayment.
Although Chapter 7 bankruptcy provides many people with bankruptcy alternatives and a new beginning concerning their finances, it is not a panacea for their problems. The courts do not just grant a complete discharge for debts without fully investigating the circumstances surrounding the debt. People who file for a discharge are obligated to undergo a "means test," which is a comparison of the person's monthly income to that of the state's median income. Due to the new law, bankruptcy petitions are subject to greater scrutiny than in previous years and they require the signature of a lawyer. Bankruptcy filings in the past year also affect the status of one's petition according to the new guidelines. This helps the courts to decide if the person is even eligible for a complete discharge.
Courts do not tolerate abuse of the bankruptcy system. It was created as an financial alternative to people who truly cannot repay their debts. Unfortunately, too many people have irresponsibly accumulated a bunch of debt and then petitioned for the courts to discharge them through Chapter 7 bankruptcy procedures. The new codes strive to not only discourage this practice but also punish those who participate in the abuse.
Chapter 7 bankruptcy is not the only bankruptcy alternative for a debtor. Other bankruptcy options, such as Chapter 13 bankruptcy, allow the debtor to repay the debts in a 3-5 year repayment plan set up by the bankruptcy courts. The court's trustee assesses the debtor's income and debts and decides on a plan in which the money is taken directly out of the debtor's income for the purposes of paying the creditors. This option is often settled out of court with the creditors and is often used as a means for debtors to save their home from foreclosure.
Attorneys are your best friends when it comes to the decision to file Chapter 7 bankruptcy or not. Explore bankruptcy alternatives, but if this is the best solution to your case, bankruptcy lawyers will be certain to encourage it and advise you of your options. If bankruptcy is not the best alternative to your financial situation, they will also advise you as to your other options outside of bankruptcy. Once you make the final decision, the next step is to examine your spending habits so the predicament does not happen to you again.
That's the end of this article, hope you found the read interesting and useful.
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