Chapter 7 Bankruptcy
Attorneys filing Chapter Seven Bankruptcies for clients living in Alabaster, Vestavia Hills, Athens and anywhere in Alabama
Chapter 7 bankruptcy is the process of liquidation, which means all assets and liabilities are sold off. The debtor’s unsecured debts are discharged, meaning the debtor is no longer personally liable for them. Typically, the discharge occurs about four months after the date the debtor files the petition with the clerk of the bankruptcy court. In order to qualify for Chapter 7, a debtor must pass the “means test.” This test provides for a finding of abuse if a debtor’s income is higher than the specified floor amount or portion of their debts. However, debtors whose income is below the state median are not subject to the means test.
When a business files for Chapter 7 bankruptcy, it will cease all operations unless continued by an appointed trustee. The trustee generally sells all the company’s assets and divides the proceeds to creditors. A corporation or partnership does not have all its debts discharged. Instead, the business is dissolved. If a company is large enough, entire divisions may be sold off. When an individual files for Chapter 7 bankruptcy, they are able to keep certain exempt property. Alabama has exemptions for numerous types of property, including but not limited to homesteads, personal property, wages, pensions, public benefits, and any other applicable federal exemptions. Any other non-exempt assets are sold to pay unsecured creditors, which are creditors that do not have a property interest in the assets of the debtor. Most types of debts are discharged by the bankruptcy proceeding, but there are a few types of debts that may not be discharged. These include child support, income taxes less than 3 years old, property taxes, many student loans, and fines and restitution imposed by a court for any crimes committed by the debtor. A Chapter 7 bankruptcy stays on an individual’s credit report for 10 years after filing. This may make credit less available or credit terms less favorable, but so can high debt.