Chapter 7 bankruptcy is the type of discharge that most people associate with the idea of bankruptcy. Chapter 7 is also the option that most people commonly choose because it offers a fresh financial start without the obligation to repay the debts that the debtor has incurred. Although there are several other options that debtors can choose to deal with their financial troubles, Chapter 7 bankruptcy is ideal for people who have no way to repay the huge amount even with a repayment plan. However, according to the law, bankruptcy involves a variety of options and guidelines to help people make an informed financial decision. Although Chapter 7 bankruptcy provides many people with bankruptcy alternatives and a new beginning concerning their finances, it is not a panacea for their problems. The courts do not just grant a complete discharge for debts without fully investigating the circumstances surrounding the debt. People who file for a discharge are obligated to undergo a "means test," which is a comparison of the person's monthly income to that of the state's median income. Due to the new law, bankruptcy petitions are subject to greater scrutiny than in previous years and they require the signature of a lawyer. Bankruptcy filings in the past year also affect the status of one's petition according to the new guidelines. This helps the courts to decide if the person is even eligible for a complete discharge. The new bankruptcy code guidelines are designed to discourage abuse of the system. If an investigation finds abuse, the court can cancel the bankruptcy or require the debtor to repay their creditors through other means. Suspected abuse includes multiple bankruptcy filings or trying to get debts discharged immediately after an expensive shopping spree. In the end, the court and its officials make the final decision regarding a Chapter 7 bankruptcy before debtors are granted relief. Chapter 7 bankruptcy is not the only bankruptcy alternative for a debtor. Other bankruptcy options, such as Chapter 13 bankruptcy, allow the debtor to repay the debts in a 3-5 year repayment plan set up by the bankruptcy courts. The court's trustee assesses the debtor's income and debts and decides on a plan in which the money is taken directly out of the debtor's income for the purposes of paying the creditors. This option is often settled out of court with the creditors and is often used as a means for debtors to save their home from foreclosure. Before filing for Chapter 7 bankruptcy, the best thing you can do is to talk to an attorney. Maybe you can avoid bankruptcy. Bankruptcy attorneys are familiar with the entire process and can advise you as to your best options before rushing into such a drastic measure. If the attorney feels that you should file, they will also tell you which chapter of bankruptcy is the most advantageous to your particular case. Whether you decide to file or not though, focusing your efforts on changing your behavior is best so you do not end up in this situation again.
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