If your current income level and assets are not sufficient for you to be able to pay your debts in full, Chapter 7 bankruptcy may be right for you.
Chapter 7 Bankruptcy Explained
When you file for bankruptcy, you will need to be forthcoming about your finances. You will not be able to hold anything back. The application will ask you how much money you are earning right now, how much money you are spending right now, how many assets you own, and how much money you owe your creditors. You will also need to provide tax returns and paycheck stubs.
The court will appoint a trustee to your case, and they will look over your documents. You will need to meet with your trustee so that they can ask you questions about the information in your application.
After a couple of months have passed, the bankruptcy court will send you a letter in the mail. This letter will let you know whether or not your bankruptcy was accepted and finalized. If you met all the requirements and were completely honest in your answers, your bankruptcy will most likely be accepted.
Debts that Can Be Discharged in Chapter 7 Bankruptcy
Chapter 7 bankruptcy can discharge many unsecured debts. They can include:
- Utility bills
- Judgments from debt collection efforts
- Payday and personal loans
- Medical debts
- Credit card debts
The minute that you file for bankruptcy, your creditors will no longer be able to collect on the debts described above. You will have an “automatic stay” that prevents these creditors from attempting to collect these debts. This is the great advantage of filing for bankruptcy.
According to the Ghai Law Firm, creditors will also stop making collection calls to your home and workplace, which in itself can be a huge relief.
Debts That Cannot Be Discharged in Chapter 7 Bankruptcy
There are also debts that a Chapter 7 bankruptcy cannot discharge. These include:
- Student loans
- Recent governmental fines and tax debts
- Alimony payments
- Child support payments
- Home and auto loans
Can I Qualify For Chapter 7 Bankruptcy?
You qualify for Chapter 7 bankruptcy if you are earning less than the median income for your state. According to the bankruptcy laws, you must pass the means test to qualify to file for bankruptcy, and if you make less than the median income for your state, you will pass this test.
You qualify for Chapter 7 bankruptcy if you are making close to the minimum wage, and if you aren’t currently working, you qualify as well.
You do not qualify to file for bankruptcy if you don’t pass the means test. In this case, you may file for Chapter 13 bankruptcy. An experienced lawyer will be able to tell you more about that.
Should I File for Bankruptcy?
If you have large purchases on your credit cards or you need to use them to pay for things like groceries, you shouldn’t file for bankruptcy right now. You should concentrate on paying your most recent debts in full. If you paid a debt in full or transferred property to a family member, you will also need to wait to file for bankruptcy. The reason is that you will have to let your trustee know about these actions. Your lawyer can help you decide if the time is right to file Chapter 7 bankruptcy.