There are six major types of bankruptcy, but the most common is liquidation or straight bankruptcy. This is also known as Chapter 7, and some Kentucky residents understand it through negative connotations. However, it is important to understand what a Chapter 7 filing constitutes, and what it means for the future financial health of an individual or family.
Simply put, a Chapter 7 bankruptcy is considered a liquidation bankruptcy because assets are sold off to pay down creditors. The process involves filing the forms and petition with a bankruptcy court local to the individual or family, and the assignation of a trustee who sells assets to pay down creditors who have filed claims against that individual or family. Inside of a few months, the process comes to an end, and the individual or family is released or discharged from their prior debts.
However, Chapter 7 is not for everyone. It is mandatory under federal law to complete credit counseling prior to filing, as well as the completion of a means test that determines whether the individual or family's monthly income falls below the state median. If these requirements are not met, the individual or family may not be qualified for a Chapter 7 filing.
This is all to say that Chapter 7 bankruptcy can be a complicated process. This is why Kentucky residents considering bankruptcy as a potential solution for overwhelming debt could benefit from the resources offered by an experienced bankruptcy attorney. Such an individual can help to navigate the process of filing all the way through to the end, which hopefully results in a more positive financial future for those who file.