According to data provided by The Administrative Office of the US Courts, about 62% of all bankruptcy cases are Chapter 7 filings. A few different types of bankruptcy chapters are available to those considering bankruptcy; however, Chapter 7 is the most common. While filing for bankruptcy certainly will impact a person in many ways, making this decision and taking action can provide many with a sense of relief from the crushing debt they have been dealing with. When making such a significant decision, it’s only natural that there will be several questions about Chapter 7, the process, and the impact it might have on you and your family.
What is Chapter 7 bankruptcy, and how do I qualify?
Chapter 7 bankruptcy is a liquidation or discharge of debts. This allows debtors to have their debts discharged through the court process. All non-exempt assets are inventoried and used as proceeds to cover as much of the debt as possible. In many ways, this can provide debtors with the opportunity to start fresh, free from the crushing debt they were facing. However, it’s essential to know that not just anyone can qualify for Chapter 7 and that there are specific expectations in place to meet eligibility requirements, for example:
- Pass the means test
- Your income must be below the median income in your state
- Engage in credit counseling at least 180 days before filing for bankruptcy
- You have not had a Chapter 7 bankruptcy discharge in the last eight years
- You have not had a bankruptcy dismissal in the last 180 days
What are some alternatives to filing for bankruptcy?
One of the biggest questions someone considering bankruptcy might ask is, “Are there alternatives to filing for bankruptcy?” When considering bankruptcy, it’s crucial that debtors first explore all options that are available to them. Depending on your situation, there could be alternatives, including:
- Credit/Debt Counseling
- Developing a Debt Management Plan
- Debt Consolidation Loans
- Debt Settlements
- Liquidate any assets to pay debts
Are there ways to prevent a person who files for bankruptcy from becoming destitute?
One of the biggest concerns for those considering bankruptcy is what items they can keep and whether they will walk away utterly destitute after bankruptcy proceedings have been resolved. It’s a common misconception that people will walk away empty-handed after filing for Chapter 7. There are certain exemptions available to debtors that are not available to creditors. Debtors are often able to keep household goods and items that may be of no use to the creditor. Other exemptions include homestead exemptions and auto exemption, allowing you to preserve protections for a certain amount of equity. Because this process will be complicated and you will certainly want to reach the best possible outcome, it’s important to consider the assistance that a bankruptcy lawyer can provide.
While deciding to file for bankruptcy can result in many different emotions, many people find that they experience relief, knowing that they face a problem that they may have spent years stressing over. While life may change some, it’s essential to be aware that debtors can rebuild their credit after bankruptcy with hard work. To learn more about bankruptcy and the options available, consider contacting a lawyer to get started.