Personal bankruptcy is covered in the United States Constitution to protect innocent citizens from economic destruction. Personal bankruptcy is broken down into two parts in the Bankruptcy Code of the Constitution, differing by way of payment plans.
Chapter 7 bankruptcy is often referred to as straight bankruptcy because it is typically what people think of when they hear the term “bankruptcy.”
When someone qualifies for Chapter 7 bankruptcy, the majority of his or her debts will be discharged, however, some of his or her property may have to be surrendered. There is no payment plan for Chapter 7 because the debts are simply forgiven.
To qualify for Chapter 7, the filer will have to pass a Means Test. The test is very complicated, however, most people can pass. The hardest part is gathering the necessary information.
Most property that you receive after you file for Chapter 7 bankruptcy does not become part of the bankruptcy, although there are a few exceptions to this rule. These exceptions include income tax refunds for years prior to bankruptcy, divorce property awards, inheritances and life insurance that the bankrupt person becomes entitled to within 180 days of filing, which must all go to pay the debts.
Ideally, the assets of the debtor can be collected and sold for the benefit of the various creditors. All assets that are not excluded and are owned on the petition date are able to be taken for this purpose. Very often, however, the debtor has no assets, in which case there will be no property taken from him or her.
If you are considering filing for bankruptcy, contact a bankruptcy attorney for assistance. We have Arizona bankruptcy attorneys across the state who can assist you with your bankruptcy case today.