What is Chapter 7 Bankruptcy, And How Do I File It?
Under the protection of a federal judge, Chapter 7 bankruptcy can eliminate many types of excessive debt. While some assets, such as high-end jewelry and vehicles, may have to be surrendered, most filers do not need them. Chapter 7 bankruptcy is the most popular and fastest type.
Chapter 7 bankruptcy can be used to discharge most unsecured debts, including credit card debt, medical bills and personal loans. Back taxes, court judgments, alimony and child support, are all ineligible. Your credit score will be affected for the next ten years by a Chapter 7 bankruptcy. It will be harder to get credit during this period. Over the next few months, your credit rating will likely increase.
Are you able to meet the requirements for Chapter 7 bankruptcy filings?
These are the requirements to be eligible for Chapter 7 bankruptcy.
- Passing the means test is necessary. This test examines your income, assets, and outgoings.
- It is impossible to have filed a Chapter 7 bankruptcy in the last eight years or a Chapter 13 bankruptcy in the previous six years.
- In the last 180 days, you cannot have filed a Chapter 7 bankruptcy petition or Chapter 13 bankruptcy petition. It is against the law to fail to appear before a court or to follow court instructions. Creditors may seek judicial relief to recover property that they have a lien on.
How can you file for Chapter 7 bankruptcy?
It should take about six months for the entire procedure to be completed. There will be many stages.
- Credit counselling. You must get pre-filing bankruptcy counselling from a non-profit credit counselling agency within 180 days.
- Hiring a qualified bankruptcy lawyer is essential before you start looking for the paperwork necessary to file Chapter 7. When you need debt relief, it can be challenging to find the funds for a lawyer. This isn’t an easy task. You could lose your case or your debts if you do not have the proper documentation.
- Completion of paperwork: An attorney can help you file your petition and other documents. You are responsible for gathering all documentation regarding your assets, income, and obligations. A stay is automatically placed to stop creditors from garnishing or suing your income.
- The trustee assumes control: After your petition is filed, the bankruptcy trustee appointed by the court will oversee the proceedings.
- Meeting of creditors: A trustee calls you, your lawyer, and all creditors to set up a meeting. Questions about bankruptcy papers, money from trustees, and creditors will all be asked.
- These criteria will be used in determining your eligibility. The trustee will review your documentation and determine if you’re eligible.
- The trustee is responsible for managing property that isn’t exempt. The trustee decides whether assets not exempt from tax should be sold to allow creditors to receive the proceeds. Jewelry, equity in your home or vehicle, if it exceeds the state’s maximum exemption, as well as any other items, are all exempt. Chapter 7 cases consist mainly of “no assets” cases. This means there is no exempt asset that can be sold.
- You may be able to reaffirm secured debts or return collateral to the creditor to settle your secured loans. The collateral may also be available for redemption (paying the creditor today’s value).
- Before your case can be dismissed, you must take a course in financial education from a non-profit credit counselling agency.
- Discharge: Within three to six months, your petition will be dismissed. All qualifying debts will be forgiven. Within a few days, the case will be closed.
Are you considering filing for Chapter 7 bankruptcy?
It is essential to know the differences between Chapter 7 bankruptcy filings and Chapter 13. If you meet the following conditions, Chapter 7 bankruptcy is a good option.
- There are not many resources.
- Debts Take more than half your annual income to cover debts
- Chapter 7 bankruptcy chapters may enable you to forgive or discharge your debts. These include credit card debt, personal loans and payday loans.
- It will take at least five to repay your debt, even if you take drastic measures to reduce it.
The bankruptcy process does not allow you to discharge certain obligations, such as child support, taxes, or student loans. You might be able to eliminate other debts to have enough money to pay your bills.
Chapter 13 may be a better option if you have more assets and secured obligations and can repay all or part of your debts.
You have other options to get debt relief. One option is to enroll in a debt management program offered by a credit counselling agency. Before you make a decision, get free advice from credit counsellors and bankruptcy lawyers.
Recovering from bankruptcy
After bankruptcy, you will need to pay attention to your financial future and credit score. Clearing multiple debts will help you build a solid foundation.
These are the steps to rebuild your life after bankruptcy.
- Financial planning: Create a budget and set financial goals. A non-profit credit counsellor may be an excellent option to assist you.
- Rebuild credit by paying on time, keeping your credit levels low and disputing credit reporting errors.
Questions that are frequently asked
Will declaring bankruptcy harm my credit?
Your credit report will show dents from late payments or accounts that were closed when you file for bankruptcy. After receiving a bankruptcy discharge, your credit rating will improve in six months.
Can I file for bankruptcy by myself?
When you file for bankruptcy, it is a good idea to hire an attorney. Because there are so many moving parts to a bankruptcy case, even a slight error in clerical writing can result in it being rejected.
How long does it take to file for bankruptcy?
Filing for bankruptcy involves many steps. The process will take no more than six months if you have a competent bankruptcy attorney.
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