Oklahoma Blog: Bankruptcy Chapters 7, 11 and 13

Looking for a fresh start after an intense financial crisis? Filing for Chapter 7 Bankruptcy, commonly referred to as liquidation or a straight bankruptcy, may be your best option. Chapter 7 works by converting one's assets into money, which is then distributed to the various creditors to whom the debt is owed. The debts are then forgiven, or discharged. Though this is the most popular form of bankruptcy, recent legislation has passed making it more difficult for an individual to file. In 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) was enacted, bringing several significant changes to the U.S. Bankruptcy Code. Many who filed under Chapter 7 were found to be taking advantage of it, therefore BAPCPA will force many people to instead file for bankruptcy under Chapter 13.

If you are a disabled veteran who racked up debt during time spent in active duty, then you're in the clear for a Chapter 7 bankruptcy. If your debts come mainly from the operation of a business, you've also got a fast pass to liquidation. Everyone else will be subject to certain tests. Before the BAPCPA amendments, anyone in debt could file for Chapter 7, regardless of their income. Now, debtors must measure their current monthly income against the median income for a family of the same size in the same state. If the income is less than or equal to the median, the debtor is eligible for Chapter 7. If not, they must pass a 'means test.' The purpose of the means test is to figure out whether one actually has enough disposable income to repay a significant proportion of their debts, without filing for bankruptcy.

According to the BAPCPA, those who wish to file for Chapter 7 must also undergo a credit counseling course, as well as an “instructional course concerning personal financial management.” If one does not take these courses within an allotted amount of time, they may become ineligible for filing. Debtors who have received a discharge via Chapter 7 or Chapter 13 within the past eight years are not allowed to re-file. A bankruptcy court may also dismiss a case if it believes an individual has been concealing assets to cheat their creditors. Although there are certainly more hurdles to jump when filing for a Chapter 7 bankruptcy, for the vast majority of honest people, it will still be available with a little extra effort. It is strongly recommended that when filing for any sort of bankruptcy, one have a bankruptcy attorney. An Oklahoma bankruptcy attorney advises a debtor on which type of bankruptcy to apply for, when the best time is, and will also make sure that the assets involved are kept safe.