What Is Chapter 7 Bankruptcy?

In general, Chapter 7 bankruptcy allows the debtor to keep all of their personal property and belongings despite the filing for bankruptcy.

Chapter 7 bankruptcy is a common legal procedure for clearing debt, but it may not be for everyone.

In a Chapter 7 bankruptcy case, you will have to prove that you are unable to pay your debts even though your income is low. Generally, the income level should be below the median income in the state. Otherwise, you’ll face the risk of becoming homeless and unable to pay your bills.

Unlike other forms of bankruptcy, Chapter seven will allow you to get rid of most of your debt. The bankruptcy process will liquidate your nonexempt assets. These assets are heirlooms, second homes, and cash.

Once the liquidation process begins, all of your non-exempt assets must be sold or transferred to cover your unsecured debts. There are some exemptions and limitations, and you will have to work with a bankruptcy attorney to determine what is not exempt.

Chapter 7 bankruptcy does not discharge debts that have been incurred before the filing of the case. Most debts will be discharged in most cases, but some aren’t. For example, debts that arise from fraud or misconduct are not discharged by bankruptcy.

For Chapter 7 bankruptcy, a trustee is selected by the court and has the responsibility of selling your assets to pay your creditors.

During bankruptcy, your primary monthly consumer expenses are subtracted from your average 6-month income. The remaining money is your disposable income.

The higher your disposable income, the less likely you’ll be approved for Chapter 7 bankruptcy. Disposable income is the amount of money you spend each month on household expenses.

A Chapter 7 bankruptcy filing will usually take four to six months to complete. It will cost you $299 in filing fees and administrative costs and involves only one court visit.

If your income is higher than the median income in your state, you can still qualify for Chapter 7 by meeting the other requirements. You must document all of your allowable expenses for at least six months and deduct them from your income.

While most property owned by Chapter 7 debtors is exempt from liquidation, the majority is worthless as a means of raising funds for your creditors. As a result, few debtors choose to surrender their property.

The only exception to this rule is collateral used to secure a debt. However, you should know the requirements of your state before filing for Chapter 7.

While the impact of bankruptcy will decrease over time, it’s likely to have the greatest effect initially. Chapter 7 bankruptcy stays on your credit report for up to 10 years. However, it will not prevent you from obtaining new credit or getting approved for a mortgage.

Once in Chapter 7, it may mean higher interest rates and fees for you. There are many ways to protect your credit, so it’s important to do your research.

And if you’re not sure how to proceed, talk to a credit counseling professional.

As you can see, Chapter 7 bankruptcy can leave your financial situation a mess, but it’s a way to stop aggressive collection actions and reclaim your finances.

A bankruptcy attorney can help you assess whether you still have any other debts that you’re unable to pay. And remember, your attorney will help you determine whether you have non-exempt assets.

When filing for Chapter 7 bankruptcy, there’s always a risk of mistakes. If you consult with a bankruptcy attorney, you should be able to eliminate your debts without much trouble.