In the United States chapter 7 bankruptcy is the most common among the various other types of bankruptcies available. This type of bankruptcy can be used by businesses as well as individuals which basically governs the process of liquidation. This feature of liquidation instead of reorganizing the debts sets chapter 7 bankruptcy apart from chapter 11 and chapter 13.

• In chapter 7 bankruptcy a business or a partnership does not receive a discharge and is dissolved which is not the case with individuals who file for this type of bankruptcy. In an individual’s chapter 7 bankruptcy some property of the individual is exempt and usually all unsecured debts are legally discharged. This means that some liens such as real estate mortgages and security interest in car loans survive and are not written off.
• Some of the most common exceptions to the discharge under an individual’s chapter 7 bankruptcy include child support, property taxes, income taxes that are less than three years old, and any fines imposed by a court for crimes committed by the person filing for bankruptcy. This type of bankruptcy can stay on a person’s credit report for at least ten years and does substantial damage to the credit report and the score.
• However after 2005 it has become more and more difficult for people to get discharge under this type of bankruptcy. Often the trustee will determine whether it is possible for the debtor to pay all or part of the debt out of the disposable income in the next five years. This is done by conducting a means test and if the debtor is found capable of repaying the debt in part or in full then the chapter 7 is converted to chapter 13 bankruptcy which obviously does not help the debtor and is considered by many to be creditor friendly.
• There are numerous methods for filing for a bankruptcy including taking the help of a bankruptcy attorney, using federal bankruptcy forms, using the bankruptcy software, or by using the bankruptcy preparer. The safest way to get through bankruptcy procedure is to opt for a bankruptcy attorney. However the costs associated with hiring an attorney can be high. If you do not have the money to make ends meet then a bankruptcy preparer can help in making the proper templates for filing for chapter 7. However, these individuals cannot offer legal advice and do not necessarily guarantee compliance as far as bankruptcy law is concerned.
• The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) was introduced in order to avoid people with high income to file for chapter7. A means test was introduced which calculated the repayment capability of the debtor and decided whether the debtor ought to file for chapter 13 or chapter 7. Filing for chapter 13 means that the debtor will not be completely discharged and has to pay all or part of the owed amount. The only advantage to a chapter 13 Bankruptcy is that the bankruptcy will stay on the credit report for only 7 years instead of 10 which is the case with chapter 7.
• In any case it is better to avoid a bankruptcy since it destroys the financial prospects of a person for a long time. Other alternatives such as borrowing from loved ones for a short period of time or taking up another job to make ends meet are painful but pragmatic options.

If you have any more points or facts to share about chapter 7 bankruptcies, please feel free to leave a comment.