Considering Personal Bankruptcy? Filing Chapter 7 Bankruptcy Might Be the Answer.
If you’re confused about personal bankruptcy, or about the meaning of filing Chapter 7 bankruptcy, you’re not alone. The bottom line is that filing Chapter 7 bankruptcy liquidates all of your non-exempt assets, discharges your non-exempt debts, and proverbially wipes the slate clean. This form of personal bankruptcy is meant to give people the equivalent of a financial fresh start.
Bankruptcy laws make it somewhat difficult for people filing Chapter 7 bankruptcy. In order to be automatically eligible to file for Chapter 7, in the previous six months you must have earned less than the median income for a family of four in your state. You must also obtain credit counseling and a budget analysis. If your income doesn’t meet the means test, and if you can pay $100 per month toward your bills, you have to file Chapter 13 bankruptcy instead of filing Chapter 7 bankruptcy.
Debt Collectors Must Back Off
Under personal bankruptcy law, when you file for Chapter 7, you have to provide the bankruptcy court with a complete statement of all of money you owe, all of the money you make, all of the property you own, and all of your living expenses. Once you file, creditors are no longer allowed to attempt to collect on the debts you owe unless they prove their case before a personal bankruptcy court judge.
When filing Chapter 7 bankruptcy, you’re typically allowed to keep certain types of property, like your home and your car (unless you’ve used them as collateral for other types of debt). Other types of assets are put into the care of a trustee, who will sell them and pay off your eligible creditors. You have a bit of wiggle room on some items. If you owe money on your car, for example, you can work with the lender to reaffirm the loan and continue to make payments following the bankruptcy.
While filing Chapter 7 bankruptcy is designed to give people a fresh start, some types of debts are exempt from the bankruptcy proceedings. You’ll be out from under the burden of credit card debt, medical expenses, personal loans, leases, and judgments. On the other hand, unpaid taxes, child support, student loans, and criminal fines will still be on the books even after you’ve declared personal bankruptcy.
Filing Chapter 7 bankruptcy is fairly straightforward, but the chances for a successful bankruptcy proceeding depend largely on filing at the right point in time and in the right way. If your case is dismissed, you won’t be eligible to file again for two years. That’s why it’s critical to get the advice of an attorney who is experienced in bankruptcy law.
If you’d like more information about personal bankruptcy or filing Chapter 7 bankruptcy, contact us at 203-529-5100. We’re happy to outline your options so you can make the decision that’s best for you and your family.