What is Chapter Seven bankruptcy? This is also known as the straight bankruptcy or liquidation. This is used when you no longer have the capacity to settle your debts from the income you have.

The is a whole variety of reasons why you are unable to the pay your debts the most common being that you have lost your employment, the business is not doing so well, you have recently had to pay high medical bills etc.

Individuals as well as businesses can use chapter 7 bankruptcy and the reason they choose the liquidation route is because they want a fresh financial start.

You can only qualify for chapter 7 bankruptcy if you fulfill the means test. This is based on the earnings of the family in that particular state. If the family has an average income for a family that size in the state that it resides in, they are likely to achieve the criteria for chapter seven bankruptcy. If they are unable to fulfill this test that there are a few other means test that can be applied before they can be rejected for chapter 7 bankruptcy.

The other criteria’s for liquidation is that you must not have been granted bankruptcy in the last six years, if you have been rejected for bankruptcy you cannot file again for another six months and you must have your business or live within the United States.

The process involved with this bankruptcy is generally very complex, however Chapter seven seems to be the easiest out of all the bankruptcy procedures.

The court will appoint a bankruptcy trustee to oversee the whole bankruptcy procedure, in which the trustee will gather information of all your non-exempt assets and will liquidate those assets to pay your creditors. However, most of the people or businesses that file under Chapter 7, do not have any many assets to pay their creditors, especially unsecured creditors.

Once the bankruptcy trustee has all it’s information they will arrange to conduct a meeting with your creditors, this is also called a 341 meeting, in which they will disclose how much they are able to pay the creditors to enable them to discharge their debts. As it is unlikely that you will have assets to cover all your debts, the creditors will have to agree a percentage or an apportionment of the debt in full and final settlement of your account.

One of the conditions of filing for chapter seven bankruptcy and for a chapter 13 bankruptcy for that matter, you must also attend credit counseling from an approved credit counseling agency, which is approved by the Government. This must be done at least 6 months prior to filing your bankruptcy documents in to court.

Once you have been granted your chapter seven bankruptcy, you have then been given your fresh financial start and it is then your turn to put in action your life after bankruptcy. By re-establishing credit lines, reaffirming any loans you may still have and commence employment if possible.

You must be aware that after you have been granted a Chapter 7 bankruptcy, this will be listed for 10 years and will effect your credit rating that is why it is so important to re-establish them as soon as possible and it is possible. There is no reason why you cannot get an excellent credit score within 4-6 years.

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