By filing for Chapter 7, you place your property and debts in the hands of a bankruptcy court; however, in order to qualify for Chapter 7 Bankruptcy, you must submit to a ""means test."" The Internal Revenue Service (IRS) uses this means test to determine who can apply for Chapter 7 and who cannot. This is determined by comparing your income and expenses to the IRS-prescribed norm for your region. If you earn less than the median income for a family of your size in your state, you are automatically eligible to file for Chapter 7 bankruptcy. However, if your income from the last six months is greater than the median income and you can pay at least $6,000 over five years or $100 per month toward your debt, you are not eligible to file for Chapter 7 and must file for Chapter 13 instead. You will be required to repay a portion of your debts over three to five years under Chapter 13.
So, what transpires during the Chapter 7 bankruptcy filing procedure? To file for this bankruptcy, you must submit a petition and a number of other forms to the bankruptcy court in your jurisdiction. To help you anticipate what to expect when filing out these forms, you should keep the following in mind:
o Your residence
o Your current monthly income and living expenses
o Your debts
o Property you claim the law allows you to keep through the bankruptcy process (called """"exempt property"""") -- most states allow you to keep some equity in your home, clothing, household furnishings, unspent Social Security payments, and other necessities such as a car and tools of your trade.
o Assets you possessed and cash you spent over the previous two years
o Property you sold or donated within the past two years.
These are just a few examples of the types of questions that these forms will pose when you file for Chapter 7 bankruptcy.
Once you have filed for Chapter 7 bankruptcy or had a bankruptcy proceeding instituted against you, you are prohibited from selling or transferring any of the property you owned at the time of filing. Additionally, you cannot repay any debts incurred prior to filing for bankruptcy without the court's permission. However, with a few exceptions, you are free to do as you please with property and income acquired after filing for bankruptcy.""
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