Filing for Chapter 7 bankruptcy is an option for people who can no longer keep up with repayments on bank loans, credit cards, and so on. If a person ends up in a situation where their debts are out of control and they do not earn enough income to cover the repayments, they may decide to file for Chapter 7 bankruptcy.
There are different bankruptcy applications, and Chapter 7 bankruptcy is a liquidation bankruptcy designed for those on a minimal income. Filing for this type of bankruptcy means that possessions of value such as homes and cars may be sold to try and pay back some of the debt.
How Will Chapter 7 bankruptcy affect a person’s credit score?
If a person declares bankruptcy, this will be recorded and will have an impact on their credit score. A Chapter 7 bankruptcy remains on a person’s record for 10 years. There is a sizable hit to your credit at first; however, that impact lessens over time, and many people actually wind up in a better place following bankruptcy.
How does Chapter 7 bankruptcy work?
Only certain people on low incomes qualify for Chapter 7 bankruptcy, and you will have to answer questions about your income to see if you are eligible. If so, you will probably be required to sell many of your possessions to eliminate as much of your debt as possible. Only items worth less than a certain amount will be permitted to be kept in your possession, and while certain personal property is exempt, there are limits on the value of these items.
The rules and amounts vary from state to state. Examples of exemptions include some equity in your home, a motor vehicle up to a particular value, personal property, retirement savings, and jewelry.
Are there alternatives to selling possessions?
If a person wishes to hold onto their possessions but still needs to file for bankruptcy, they may be eligible to file for Chapter 13 bankruptcy instead, but only if their income is above a certain level. Filing for Chapter 13 bankruptcy enables a person to keep more of their possessions, and they will be given a court-ordered repayment plan to pay off some of their debts instead.
Who is eligible for Chapter 7 bankruptcy?
If a person’s income is below the median level for their state, they should be eligible. However, this does not mean that everyone who earns above the state median is exempt. People who do make more need to be means tested, which is a test to assess whether they have enough disposable income to continue paying off some of their debts. If it is found they do not, they may qualify for Chapter 7 bankruptcy.
Does Filing for Chapter 7 bankruptcy eliminate debts?
Even if you are eligible to file for Chapter 7 bankruptcy, you will still be obligated to pay back some debts, such as student loans (unless you can prove that a permanent injury or illness prevents you from doing so). Recent tax debt, alimony, and child support will also still be owed if applicable.
How do you file for Chapter 7 bankruptcy?
Filing for Chapter 7 bankruptcy involves filling out a petition for bankruptcy at a U.S. Bankruptcy Court. You will also need to pay a fee of $335 to file the petition, though this can be paid in four monthly installments and may be waived at the court’s discretion.
Are you considering filing for Chapter 7 bankruptcy? If so, you may want to consider hiring an experienced attorney who specializes in bankruptcy matters. At the Hedtke Law Group, we know how stressful filing for bankruptcy can be, and our experienced, professional team can provide legal advice and assistance to help make the process easier – so why not give us a call at 626.502.8405 today?