A Chapter 7 is a type of bankruptcy where a bankruptcy court trustee takes non-exempt assets and liquidates them in order to pay for legitimate creditor’s claims that have been presented to a bankruptcy court. Complicated bankruptcy laws governing a bankruptcy court procedures raise many questions to potential filing debtors. Here are some Chapter 7 questions asked by various first time filers and their potential answers:
Should you close a business and liquidate assets before filing?
Any individual, married couple, partnership, or corporation can file a Chapter 7 if they qualify to file. If you close a business and liquidate your assets before you file bankruptcy, the income from the liquidation might place you into an income bracket changing the type of bankruptcy you are qualified to file or, depending on what you do with the money from the sell of business assets, may be seen by a bankruptcy court as preferential treatment or even fraud.
If you are going to file bankruptcy under a Chapter 7, it may be much better to allow a bankruptcy court to liquidate the business assets to pay off your creditors.
Should you move jointly owned property to your spouses name before filing a Chapter 7?
The answer to this question is simply NO. Bankruptcy law prevents any debtor from trying to hide your assets even if it is giving the asset to your spouse. If you file as an individual, your spouse will not be responsible for paying any of your debts, and what is in your name, even if owned jointly, is considered to by one of your assets. Trying to change ownership of an asset right before filing a bankruptcy might be construed as fraud by a bankruptcy court.
If you are going to file a Chapter 7 as a business owner, will obtaining employment wages affect the bankruptcy?
Potentially, the answer could be yes. The new wages could impact your Means Test and put you into a Chapter 13. Usually, a bankruptcy court looks at your last 6 months prior to the filing date to determine eligibility for a Chapter 7, but at the creditor’s meeting if a trustee asks you if anything has changed concerning your income, you would have to reply with the truth.
Normally, the trustee is required to provide you with a list of presumed abuses 10 days before the creditor’s meeting, but when you file, you are required to provide the court with any anticipated increase in income or expenses after filing. If that income increase happens, you might be required to share that information with the trustee. Whether or not he files a petition for dismissal forcing you to a Chapter 13 is up to the individual trustee. If he or she does file a petition, a bankruptcy court judge would have to decide whether or not to dismiss the case.
Should you stop paying credit cards prior to filing a Chapter 7?
The most logical answer to this question is yes, but timing is very important. Why pay unsecured debt when they are going to be discharged? In addition, paying the debts at a certain time could be viewed by the trustee as preferential treatment and most likely might be recovered by the trustee. In this case, your bankruptcy lawyer will know the best time to stop paying credit card debt.
- Are There Good Reasons Not to File a Chapter 7? (betterbankruptcy.com)
- Can Filing Pro Se In Bankruptcy Make You a Serial Filer? (betterbankruptcy.com)
- Chapter 7 Versus Chapter 13 Bankruptcy (bankruptcylawadvice.wordpress.com)
- Chapter 7 Replacement Values in Listing Personal Property (betterbankruptcy.com)
- Chapter 7 Bankruptcy and Preparing to File (betterbankruptcy.com)
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