Although there are many details and important side-points to understand when considering filing for bankruptcy, a solid comprehension of the major characteristics of a Chapter 7 bankruptcy can help a debtor better recognize their options. Between the two primary consumer debt reduction bankruptcies, Chapter 7 is undoubtedly the more straightforward in terms of clearing away debt in a certain period of time. For many debtors, this directness can make this kind of bankruptcy ideal for their debt needs.
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The primary reason a debtor files for Chapter 7 bankruptcy is to clear out as much of their debt as possible. When compared to Chapter 13, the debt discharge system of this type of bankruptcy allows a debtor to recognize the fullness of their debt and trade the ownership of much of their property for the clearance of their debt. However, as debt discharge is a major pull for many fighting to get through their debt problems, there are some downsides.
When classifying debts, one of the major considerations is whether a debt is considered dischargeable or non-dischargeable. One of the problems with a discharge-based bankruptcy is that any debts not discharged in the process must be appropriately handled by the debtor, even though much of their property is taken in the foreclosure and repossession process.
After 2005 and the passage of the Bankruptcy Abuse Prevention and Consumer Protection Act, debt discharge became more difficult to achieve in a bankruptcy. With the addition of the means test, many debtors are required to go through the debt restructuring programs of a Chapter 13 process. Even those who pass the means test must first go through a credit counseling program. Both of these may be skipped if a person qualifies for certain exemptions.
To learn more about bankruptcy and debtor options, contact a bankruptcy attorney.
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