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Chapter 7 Bankruptcy

Chapter 7 Bankruptcy

Chapter seven bankruptcy is named from the chapter of the bankruptcy code which can be found at Chapter 7 of Title 11 of the United States Code.

Chapter seven bankruptcy is designed to give the debtor a fresh start. In chapter seven bankruptcy all dischargeable debts will be cancelled. Creditors are cut off from claiming any debt in the future. Most people get to keep all of their property including their home in chapter seven bankruptcy.

While filing a chapter seven bankruptcy may seem simple, knowing all existing options, filing the proper court documents and understanding how to protect your property through the bankruptcy can be confusing and overwhelming.

How it works

Before a bankruptcy petition can be filed with the bankruptcy court in most cases the filer has to pass the means test. Before the changes to the bankruptcy code in 2005 most filers could chose the type of bankruptcy (chapter 7 or chapter 13) that suited their particular goals. Credit card lobbyists pushed through changes to the bankruptcy code, which made it much harder for consumers to cancel their entire debt. Instead more and more people are forced to repay part of their debt over a three to five year period.

To find out whether a consumer can cancel all of his debt under chapter seven the consumer must first calculate his/her current monthly income. This figure must be compared to the median income for the size of the consumer’s household in California. If the current monthly income is higher than the median income in California the filing of the bankruptcy petition will be presumed to be an abuse of bankruptcy unless the consumer can show that it passed the means test.

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