Chapter 7 Bankruptcy

Essay by sethryanwardCollege, UndergraduateB, August 2009

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A business or an individual who is unable to pay for his/her/their debt may file for or may be forced to file for Chapter 7 Bankruptcy. If a person/business is severely indebted to his creditors they will file bankruptcy in a federal court under Chapter 7. This means that the person/business will liquidate all his/hers/its assets and those assets will be dispersed between all the creditors. In the case of a business after Chapter 7 there business will no longer be able to operate.(Chapter 7, 2008)Chapter 7 has changed over the past few years so now the courts look harder into the debtors income and assess the debtors ability to repay the debt, if not just a portion. The new examination of the debtors assets is calls a means test, this test determines if the debtor who is filing bankruptcy has any ability to repay his/her/their debt. If the amount of income after expenses and cost of living comes to over $100/month they will be forced to file a Chapter 13.

People file bankruptcy for many reasons. Job loss is a huge one especially in this economy currently where unemployment is over 9% and job loss is growing every day. Some people file because they have accrued some unexpected medical bills that they can not afford, or medical problems have had them out of work and unable to take care of their finical obligations. Some time divorce can be so expensive it can cause some one to file for bankruptcy.

Once a person files for bankruptcy interest rates sore. Some creditors see people who have just filed for bankruptcy as having no debt and therefore they have more money to accrue more debt. Loans for a home or car would be so high it could be a significant...