Most people file for Chapter 7 bankruptcy because of the three main reasons:

1. It is much faster then the other Chapters. With a little effort on your side, you can have the entire process over in next four to six months.

2. It is also simpler to file. No frequent visits to court are required.

3. There are no after payments. Once your bankruptcy is discharged that is it, you are debt free. (Under the 2005 bankruptcy law, not all debts can be discharged anymore so consult with your attorney before filling).

On the other hand, Chapter 7 has a catch, the court will decide whether you are allowed to file for it or not. One of the main reasons why you can be denied to file for Chapter 7 is your income. If it happens to be sufficient to payoff some of your debts (after your allowed living expenses have been counted in) then you might be forced to file under Chapter 13 bankruptcy law.

How to check if you can apply?

First thing you need to do is to calculate your average earnings in the last 6 months and compare it with average income for the state you live in. You will be allowed to file under Chapter 7 if your income happens to be lover or the same as the median income of the state you live in.

In case that your average income is higher than that, and you still want to apply for Chapter 7 bankruptcy you will have to go through one more test called the Means Test.

So what is a means test?

It is a test based on the results calculated for your allowed living expenses.

How to calculate my living expenses and what can I include in it?

It is actually quite easy to calculate it. Take all your income from one average month and deduct the following allowed expenses:

1) Utility bills, transport (gas), food, clothing. (Make sure to use IRS amounts for these or the court will not take it in to account).

2) Your secured monthly payments like child support, car loan, mortgage and tax.

After you finish with the calculation and your average disposable income per month is lover then $100, you have passed the means test and you stand a fair chance of being approved to file for bankruptcy under Chapter 7.

If on the other hand your disposable income happens to be more than that (figure most often mentioned is $166, but it can vary), you will most likely have to file under Chapter 13 of the bankruptcy law. That is unless you can provide evidence that there are some special considerations to be taken in your account.

For any figures between $100 and $166, it is best to consult with your attorney. Make sure to find an attorney that specialize in bankruptcy and credit repair and has the solid reputation.

Sometimes situations arise when you can no longer pay your bills. Although you may have the best intentions of paying off your debt, you simply may not have the means to make this happen. When you can no longer pay your bills, you may need to consider filing bankruptcy. Hopefully you will have considered your alternatives but sometimes bankruptcy is the most viable option. The question then becomes which type of bankruptcy will best suite your financial needs, Chapter 7 Bankruptcy or Chapter 13 Bankruptcy. Your current situation will help you to decide which bankruptcy route is best for you.

A majority of consumers choose to go with Chapter 7 bankruptcy. There are a variety of differences between Chapter 7 and Chapter 13 bankruptcy. Chapter 7 bankruptcy does not require you to make a plan of repayment. When you file for Chapter 7 bankruptcy, your debt is not immediately wiped out. Instead, a bankruptcy trustee will sell off your non-exempt assets in order to pay off your debts. It is important that you understand with Chapter 7 bankruptcy, you could potentially lose any property that you currently own.

However, with Chapter 13, you are not required to liquidate your assets in order to repay your creditors. Instead, you make a repayment plan to pay a portion or all of your unsecured debt back. This is done through the court system and payments can be made over a 36 to 60 month period. The amount you repay your creditors must be equal to or greater than what they would receive should you have liquidated your assets, as with Chapter 7 bankruptcy. If you follow through with your repayment plan, then your remaining unsecured debt will then be discharged.

If you have lost your job or have no means of repaying your debt, then you should probably consider filing for Chapter 7 bankruptcy. However, if you are still able to meet some of your monthly obligations, but cannot pay off your entire debt, then you may want to consider filing for Chapter 13 bankruptcy.

It is important that you have a full understanding of the lasting impact of filing for bankruptcy. Whether you are filing for Chapter 7 bankruptcy or Chapter 13 bankruptcy, there are financial consequences. Chapter 7 bankruptcy will have a steeper impact on your financial situation. By filing Chapter 7 bankruptcy you are telling creditors that you cannot be trusted to pay off your debts. Therefore, you will have a hard time finding creditors to lend you money in the future. This will be extremely important if you are ever in the need for a new car, mortgage or even a simple credit card.

Chapter 13 has less of an impact on your overall credit rating. Since you are still paying off your debt, just in a restructured form or at a lower interest rate, creditors see you as less of a financial risk, than someone who has wiped out there entire debt through Chapter 7.

Be aware that there are certain types of debt that cannot be discharged with either chapter of bankruptcy, so make sure you have a thorough understanding of bankruptcy law, especially with the major recent changes to the laws.

There are both pros and cons to filing either Chapter 7 bankruptcy or Chapter 13 bankruptcy. Before committing to either one, you should sit down with a financial adviser and go over your obligations and options completely. Weighing out the pros and cons of both types of bankruptcy and basing your decision on your current situation, you will be able to easily decide which bankruptcy route you should go with.

Sometimes bad things happen to us and we feel like we have hit a bad end. Bankruptcy is among those embarrassing and gut wrenching situations that many of us hope never to find ourselves in. however, when the worst comes to the worst and we find ourselves in this position, it is only fair to ourselves that we grace ourselves with courage and set out to do what is required of us i.e. take legal action.

If you feel that there are no alternatives to your situation in terms of repayment to your creditors, the last resort could probably be filing for bankruptcy. This means that you have to put a record in court to show that you are no longer able to pay your creditors. In as much as this will paint a negative image about your credibility, it will save you from the agony of being called every now and then by your creditors.

In addition, the creditors, by law, will be required to stop any further action they may be planning to take against you. You need to know that there are various chapters of the law governing bankruptcy. The five most common ones are 7, 9, 11, 12 and 13. While they all talk of the different approaches to insolvency, let us take some special attention on chapter 13 bankruptcy law.

It is also referred to as ‘Adjustment of Debts of an Individual with Regular Annual Income.’ It actually makes one feel like life is giving you a second chance because it gives you up to 5 years to clear your debts. Your assets are not liquidated and you are allowed to keep them. All you need is to make a commitment of how you will repay your creditors over this period of time through a trustee.

Bankruptcy law under chapter 12 is designed for family farmers or fishermen. It allows them to make repayment plans that will allow them to pay their creditors partially or fully within a period of not more than five years. This law only applies for farmers or fishermen with regular incomes. This chapter is special as it caters for them since they have seasonal incomes as opposed to chapter 13 which is advantageous to many as it caters for those with regular incomes.

Unlike in other chapters, the family farmer or fishermen bankruptcy chapter is voluntary. This means that the debtor files the petition himself as opposed to involuntary filing of a petition where the debtor is forced to file such a petition. This chapter applies to family farmers and fishermen in one category and partnerships and corporations in another category.

For the individual debtors under this chapter who fall in the first category, they must fulfill a few requirements. These include the fact that the individuals activities must be either farming or fishing, that a good proportion  of the individuals debts must have been generated from the fishing or farming activities.

For the second category of partnerships and corporations, they must have part of owed assets owned by one of the members or a family of the partner who must be engaged in fishing or farming activities. In case corporations that deal in stock choose to file petition under this chapter they must therefore not issue stock to the public.  They must be willing to go through counseling as the bankruptcy laws requires.

The bankruptcy laws as defined in the bankruptcy code of the United States have been categorized into various chapters and one of the most common types of bankruptcy is chapter 7 bankruptcy. The concept of bankruptcy that a common man has is the concept described in the chapter 7 of the bankruptcy laws.

What Is Chapter 7 Bankruptcy

Chapter 7 bankruptcy is the option for the debtors to get rid of all the debts that they owe to various creditors. In this method, the bankruptcy court appoints a trustee to liquidate all the assets of the debtor and settle the claims of the creditors with the money thus collected. The advantage to the debtor is that he or she is now responsible to pay as much debt as is the value of their assets. They will not have the obligation to repay the debts that could not be paid with the money collected from liquidation of assets.

That is the reason most people who have caught themselves in too much debts to be paid off with the means and assets available to them look at chapter 7 bankruptcy as an attractive option. It provides them an excellent opportunity to give their financial life a fresh start with no obligation to repay the debts they owe.

Is Chapter 7 Bankruptcy Easy To Be Granted For The Debtors

Whether or not the chapter 7 bankruptcy is easy for the debtors depends upon the specific bankruptcy case. However, in order to prevent bankruptcy frauds, the bankruptcy laws require the debtors to go for a Means test before they are declared as bankrupt. The objective of the means test is to compare the debtors monthly income to that of the states median income. If the debtors monthly income is greater than the state’s median income, he or she is not granted bankruptcy under chapter 7.

Rather they are asked to file for bankruptcy again under chapter 13 where they will be suggested a repayment plan to pay off the debts along with the opportunity to reorganize their finances under the expert guidance of the trustee appointed by the bankruptcy court. Therefore, it is very important for you to check out everything before you file for chapter 7 bankruptcy. I must add that converting the bankruptcy claim from one type to another will require you to pay the conversion fees, which is substantial in nature.

Therefore, the prudent way is to let your bankruptcy attorney be aware of all the facts so that they could help you find the best possible solution.