Lots of people file Chapter 7 bankruptcy each year. Filing for chapter 7 can cancel all your debts but you might have to liquidate all of your non-exempts assets. Under the Chapter 7, the bankruptcy court orders an appointed case trustee to sell your properties and distribute the proceeds to your creditors based on the priorities established in the Code.
The process of filing Chapter 7 can take any place from three months up to six months before your debts are finally discharged. During this time, you can’t apply for new credit or spend on your old credit. In addition, there are restrictions on how often you can file Chapter seven.
In the past decades, most people have taken advantage of this filing for debt relief. However, the new bankruptcy law limits those who can actually qualify to file the Chapter seven bankruptcy. So, if you’re considering a personal bankruptcy finding out if this filing is the right choice for you.
Things to Do Before Filing Chapter 7 Bankruptcy
While the new bankruptcy laws limit debtors who can qualify to file Chapter 7, many are still finding benefits in filing these discharges. To learn if this is the right choice for you, there are several things that you must do first:
- Make sure that you have done everything in your power to lower your debt on your own.
- Make sure that you qualify by talking with your attorney. Usually by taking a means test with him or her you will understand whether you qualify for Chapter 7 or Chapter 13 or not.
- Finally, educate yourself about what the bankruptcy process entails.
It is also important to understand that the best person or couple to file this type of filing is a debtor who has little or no assets. Since in this liquidation bankruptcy your creditors can stake claim on your properties, make sure that you don’t have assets that are valuable enough for the creditors to file against.
Chapter 7 Bankruptcy Exemptions
Each state has provisions in place to decide what you can and can’t keep when filing. For some, you will be able to keep the equity that you have in your home. In others, you will have to turn over your household goods that are in excess of a certain dollar amount. In some states, you can keep your wedding rings.
When it comes to your home and your car, these too change depending on the place that you live in. In some areas, you will be able to keep them if you are current on your payments and your lenders agree to continue with the payment plan.
In other cases, you can lose your home or cars to your bankruptcy filing. The funds from any sale of assets will go towards paying off the money you owe in debt to your creditors. Even if it is just a little amount, it will be split fairly.
So, is Chapter 7 bankruptcy right for you? Consider talking to your personal bankruptcy attorney to learn more about whether this is the right choice for your financial future or not.