Chapter 7 Bankruptcy Explained
State and federal laws protect the process of going through bankruptcy. These laws, which are different in every state, can be rather complicated. Prior to deciding about bankruptcy, be certain you have all the facts about how the laws in your state will apply to you. Speak with a local bankruptcy attorney to find answers. Complete the free form below to get a free case evaluation with a lawyer in your area.
In the past, many viewed bankruptcy as the opportunity to wipe out all of their debts and start over financially. New bankruptcy laws make it more difficult for some individuals to do this through bankruptcy. This means that more people have to try to repay their debts, even with bankruptcy protection. That said, for those who qualify, Chapter 7 Bankruptcy generally allows them to eliminate debts without repaying them.
Qualifying for Chapter 7
The primary qualification for Chapter 7 bankruptcy protection is financial. In order to qualify, you should usually make at or below the median income level in your state. Also, this type of bankruptcy is usually reserved for individual debtors, not those who run businesses or businesses themselves. You cannot file Chapter 7 if you have previously filed Chapter 7 or had a complete Chapter 13 repayment plan in the last 8 years.
How Chapter 7 Bankruptcy Works
Under Chapter 7 Bankruptcy protection, you will be accountable to a trustee. The trustee’s job is to collect and sell any non-exempt property. The money from that sale is given to your creditors in order of importance, as set forth in the state. You do not make any payments to the trustee, however. Once your assets are sold, whatever debts are left that are dischargeable under the law are erased.
Not all debts are dischargeable, however. Each state’s laws are slightly different, but you will not be able to discharge debts such as child support payments and back taxes. Your bankruptcy attorney may help you determine which of your debts will be dischargeable, and which you will still be responsible to pay.
Chapter 7 Bankruptcy and Your Assets
Filing for Chapter 7 Bankruptcy means many of your assets may be sold. All states have a list of exempt assets. Examples of this would be a homestead exemption, which can be used to help you keep your home or a portion of its equity, a vehicle exemption, and exemptions for family heirlooms and the items you need for day to day living, like food, clothing, and cooking utensils. You can ask your attorney, if you have one, about the exempt assets in your state, and what you can do legally to protect your belongings.
You may also be able to keep your home or car if you have loans on them. You will need to sign a reaffirmation agreement, which states that you are going to continue making your payments on these particular debts. If you do this within the time frame outlined by the law, you may be able to keep these assets, depending on your state’s exemptions and the amount of equity in these assets.
Benefits of Chapter 7
The main benefit of Chapter 7 Bankruptcy is the fact that you will mostly likely be rid of all dischargeable debts. If you have a high amount of consumer debt that you cannot get rid of, this could give you the chance to start over. If you are wondering whether or not you qualify for Chapter 7, you can choose to speak to a lawyer for more information.
