In its most basic iteration, Chapter 7 will eliminate the majority of your debts. In exchange, you may be required to surrender some of your property, even if it is not at risk. Unlike Chapter 13, this type of bankruptcy does not necessitate a repayment plan. Your debts are merely canceled. Period. No one can take any money you earn after submitting your taxes; it is yours to retain. Even if you win the lottery the following day, it is yours! You could cancel the bankruptcy filing or simply repay all of your creditors, but the decision would be yours to make.
There are a few exceptions, such as tax refunds due to you prior to filing Chapter 7, but the majority of property you acquire after filing Chapter 7 is not included in your filing. Inheritances and life insurance proceeds that you become entitled to within 180 days of filing for bankruptcy are also applied to the repayment of your debts.
It is possible to seize and sell a debtor's assets for the advantage of creditors. Technically, any nonexempt assets possessed on the date of filing are subject to taxation. In reality, 96 percent of consumer bankruptcies are known as ""no asset"" cases, meaning that no property is removed from the debtor, either because it is exempt or because it is so worthless that it is not worth the hassle of selling it.
If you earn more than the state median income, you must pass a means test to qualify for Chapter 7 bankruptcy. This test must demonstrate that you don't have enough income to pay a significant portion of your debts. Although the test is difficult to figure out, nearly everyone who attempts it passes. The biggest headache relating to the exam is gathering all the information for the test.""
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