Chapter 7 bankruptcy – also referred to as liquidation bankruptcy – gives debtors the ability to clear different types of unsecured debts. If you are struggling to make repayments, if your finances seem out of control, or if collectors are calling you persistently, and if you have been through credit counseling, filing for Chapter 7 bankruptcy might be that last resort that can help you get on track with your finances again.
How Does Chapter 7 Bankruptcy Work?
The process starts by you filling out forms and submitting the required documentation surrounding your income, expenses, assets, debt, and tax returns to the bankruptcy court. The court appoints a trustee to oversee your case.
You need to attend a brief creditor meeting as part of the process, where you are required to answer some questions about your case. You are also required to complete a second course in credit counseling. Once this is done, it may take a little over two months for you to receive a court notice notifying you of the acceptance of your plea for discharging your debts.
As an end-result, the trustee might still take over some of your nonexempt property. The ruling will also reflect on your credit report for the next 10 years.
Who Should Consider Filing?
Since you may file for bankruptcy only once every eight years, it is important that you think your decision through. You may consider filing only if any of these preconditions apply to your case.
What Debts Can and Cannot Chapter 7 Erase?
While Chapter 7 bankruptcy gives you the ability to erase different types of debts, you are still held responsible for some others.
|Child support payments
|Personal loans and lines of credit
|Tax-related debts and government fines
|Previous judgments from debt collection and credit card companies
What About Debt Reaffirmation for Secured Assets?
If you wish to hold on to a secured asset such as an automobile or a piece of expensive furniture, you need to reaffirm the debt. However, this might not be the best way forward if you owe more than the worth of the asset, or if you’re dealing with a high interest loan. If you plan to reaffirm a debt with a lender, make sure you discuss it with a bankruptcy attorney first.
Should You Consider Filing Now?
You may consider filing for Chapter 7 bankruptcy if one or more of these points apply to your case.
If you’re still unsure about whether filing for Chapter 7 bankruptcy might work well for you, consider contacting an attorney who specializes in this realm. If you decide to move forward, your attorney can guide you through all the paperwork and also represent you in court, if so required.