Personal Legal Perspectives
Who may file Chapter 7 bankruptcy? How has this changed over the past few years?
This form of bankruptcy is known as straight bankruptcy and individuals and business entities that are overwhelmed by debts can file for bankruptcy under this chapter. For individuals to be eligible, their median income must be below normal and for those whose median income is high, they must have taken a means test and the results must show inability to support payment of the debts (Elias, Renauer, & Leonard, 2009).
In addition, for individuals to file under this chapter they must not have willfully failed to appear in court in the preceding 180 days (Elias, Renauer, & Leonard, 2009). Individuals who have received credit counseling in the previous 180 days are also eligible to file for bankruptcy under this chapter (Elias, Renauer, & Leonard, 2009). Individuals who have not received debt discharge in the last 8 years are also eligible. Others who are eligible are those whose bankruptcy filings have not been dismissed in the last 180 days (Elias, Renauer, & Leonard, 2009).
In 2005 chapter 7 was changed and this was meant to limit the number of bankruptcy petitions filed under this chapter. Before 2005, people were free to choose the form of bankruptcy that appealed to them and majority chose straight bankruptcy as there is no repayment of debts (Elias, Renauer, & Leonard, 2009). The new rules required determination of the capability of the filers to repay based on their median income. In addition, people were required to undergo credit counseling before filing under this chapter (Elias, Renauer, & Leonard, 2009).
What are some of the reasons people file bankruptcy?
The reasons why people file for bankruptcy are several. Examples include loss of employment, to enable one pay their student loans under a plan that suits their ability, the desire to start anew, to prevent foreclosure of homes, to stop harassment by creditors, to prevent repossession of one’s property by creditors, to eliminate or reduce the burden of high medical bills, and to challenge fraudulent creditors (Elias, Renauer, & Leonard, 2009).
How does bankruptcy affect interest rates on loans? Credit cards?
Though it is still possible for one to get debit cards and loans after having filed for bankruptcy, their reputation is usually ruined. They are usually charged high interest rates on loans and debit cards since such individuals are considered a high risk (Elias, Renauer, & Leonard, 2009). People who are high risk are those who are likely to default and banks do compensate for this risk by charging high interest rates.
Elias, S., Renauer, A., & Leonard, R. (2009). How to file for chapter 7 bankruptcy,
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