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How to File Bankruptcy for the Total Liquidation of Debts

Bankruptcy under Chapter 7 is the most popular option for consumer cases. This type of case is both affordable and quick in non-contested cases. Even more importantly, no payment on most debts is required unless you want to keep collateral. Of course, as always, there are exceptions. To get the most out of a Chapter 7 case you should understand the process before filing.

We hope the following Chapter 7 tips will help if you consider filing bankruptcy. The total liquidation and discharge of all debts is available under this chapter. Debtors may even keep a homestead, other real estate, retirement accounts and vehicles. The trick for enjoying these great benefits is to begin planning early. Allowing a month to plan is sufficient for most people. Even better, if you have six months, you can virtually guarantee a trouble-free case.

Are you ready to get started? Let’s begin by covering a few basic requirements.

Chapter 7 Strategies and Tactics for Best Results

Chapter 7 Liquidation
Begin Planning Early for Chapter 7 Liquidation to Improve Your Results

To qualify for Chapter 7, debtors must pass the means test. In simple terms, people who too much income in the past may have trouble qualifying. This bankruptcy test is the most common cause of problems in this type of case. Below you will find more information about the test. You will also find out what you can do about it to eliminate all potential problems.

A few types of debts are non-dischargeable. As you would imagine, debts owed to the government are rarely dischargeable. These types of debts include back taxes and fines. Federally guaranteed student loans may or may not be dischargeable depending on each debtor’s unique circumstance. Payments for child support are rarely dischargeable.

Most debts however are dischargeable. You may wipe out debts owed on credit cards, car loans and mortgages. You may wipe out debts owed for many types of civil judgements. You may wipe out debts for almost all secured loans. Of course, you can wipe out all credit card debt.

Debtors have an option to keep collateral. In addition, a special agreement (known as a “Reaffirmation Agreement”) is required to keep collateral. The court must approve these agreements.

Definition and Understanding Liquidation vs. Reaffirmation

The bankruptcy definition of reaffirmation is not very helpful for most people. The definition is vague and refers to many other U.S. Code Sections. To understand this definition, familiarity with court rules and customs is necessary. The important thing to know is that liquidation or reaffirmation is a choice, but you cannot have both. You can keep collateral and pay for it, or you can return the collateral and wipe out the debt.

Each state provides an exclusive list of exempt property. The types and amounts of assets that are exempt are provided by state statutes. The amount of an exemption for any given class of property is subject to periodic change. In addition, in 15 states, debtors may also elect to use federal bankruptcy exemptions. Choosing the best option for exemptions is a choice that depends on property owned, values, and each person’s unique circumstance.

The Bankruptcy Means Test and Chapter 7 Qualification Can Be Difficult If You Wait Too Long

Bankruptcy Optimization
Thorough Bankruptcy Optimization is essential for Qualification

The official means test form in Chapter 7 cases is not very user friendly. It includes many terms that are legal terms of art. What this means is that a thorough understanding of laws, rules and court cases is necessary to understand how courts use these terms. Some people claim the test is intentionally difficult by design. It scares many people away from liquidation cases so this may be true.

Also know that the results of the means test can and do change frequently. In fact, the test result changes each day. These changes occur because actual income and some personal expenses are used in the calculation. As time passes, the look-back period moves forward, day by day.

You can intentionally improve your test results if you have enough time. The secret for great results is to understand how the test works and what you can legally do. This entire process is fully explained in the Bankruptcy Strategies Manual.

This manual includes an extensive set of forms, worksheets, instructions and tips. All are user friendly and make improving the means test result simple. With just a little time to prepare and make small changes, the benefits multiply many times over in each case.

To discover your personal options today, please refer to our home page.