If you’re considering filing for bankruptcy, you probably have more than a few questions. How do you know if bankruptcy is right for you? Do you even qualify to file for bankruptcy? Which kind of bankruptcy should you file for?
This guide will walk you through the basics of Chapter 7 bankruptcy, what it means, and who it is right for.
What is Chapter 7 Bankruptcy?
Chapter 7 bankruptcy is a legal way that you can address your unmanageable debt and gain back control of your life. Under Chapter 7 bankruptcy, you’re able to discharge appropriate debts that you may not be able to pay back.
While getting rid of your debts may seem like an opportunity anyone and everyone should jump at, filing for Chapter 7 bankruptcy takes serious thought and consideration. In order to get your debts discharged, you must first liquidate all non-exempt assets.
Your specific non-exempt assets or property will depend on your situation and what you are able to qualify as exempt in your area. A professional bankruptcy attorney can help you exempt important assets or property, but keep in mind that you may need to forfeit some large items, potentially including your home.
How do I file for Chapter 7 Bankruptcy?
Filing for Chapter 7 bankruptcy will take time and commitment. To begin the process, you will need to fill out a petition outlining information about your debt, possessions, and income. You will also need to describe what property or belongings you would like to make exempt during the bankruptcy process, potentially including your car, household items, and some equity in your home.
After you file for Chapter 7 bankruptcy, you will be protected from creditors attempting to get their money back from you. This means that a creditor cannot take additional measures to receive payment from you, including cutting off your utilities, attempting to take your car or home, or even garnishing your wages.
Filing for Chapter 7 bankruptcy also means that you cannot sell any items that you have described in the court documents. You should also refrain from making payments on any of the debts claimed during filing.
Once your paperwork has been submitted, you will be required to attend a “Meeting of Creditors.” At this meeting, you will be responsible for discussing the state of your finances, the amount of your debt, and what kind of living expenses you have. You should come to your meeting fully prepared to address the amount of money you owe, who you owe it to, and why you believe that debt should be discharged.
How does Chapter 7 Bankruptcy Work?
After you have successfully filed for bankruptcy, you will work hand in hand with a bankruptcy trustee to manage your debt. Essentially, your debt and your possessions that are not exempt will be treated as property of the court. Your trustee will oversee that your debts are paid to their best ability.
To get money to pay your debts, your bankruptcy trustee will start negotiating the sale of non-exempt items. If you have secured debts, such as a mortgage, the guaranteed item will be sold to cover that specific debt. To pay off unsecured debts, such as credit cards or medical bills, other assets or property will be sold.
Once your debt is covered or you do not have other assets to sell, the bankruptcy process will be over. If there is still debt remaining, applicable debts will be discharged by the court. This means that you are no longer required to make payments on that borrowed money.
However, not all debts can be discharged. Student loans, child support, and spousal care are just a few of the debts that you cannot discharge through Chapter 7 bankruptcy.
Is Chapter 7 Bankruptcy Right for Me?
Chapter 7 bankruptcy isn’t right for everyone, but it can be helpful for anyone feeling overwhelmed by their debt. If you feel that your situation cannot improve without the help of the court and a bankruptcy trustee, then filing Chapter 7 can be best choice you can make.
To further discuss bankruptcy and your financial situation, a bankruptcy attorney is available to answer any questions you may have. If you feel that Chapter 7 bankruptcy is in your future, contact a bankruptcy attorney who can help you through the process.