A Bankruptcy Lawyer Discusses Chapter 7 Bankruptcy
Being in debt can be overwhelming. If this applies to you, consider filing for bankruptcy. There are two primary types of bankruptcies for individuals: Chapter 7 and Chapter 13 bankruptcies.
Most people file for a Chapter 7 bankruptcy, which is a liquidation bankruptcy. In other words, an appointed trustee sells off your nonexempt assets so that your creditors are paid back. If you're considering filing for a Chapter 7 bankruptcy, here's what you need to know about it.
Purpose of a Chapter 7 Bankruptcy
This type of bankruptcy is intended for erasing unsecured debts, which are debts not involving specific property such as a car or a home. Common examples of unsecured debts include those as medical bills, credit cards, payday loans and utility bills.
However, your creditors don't receive anything if you lack nonexempt assets. Most individuals will have no nonexempt assets and are able to retain all their property.
Advantages of Chapter 7 Bankruptcy
- It's shorter. While a Chapter 13 bankruptcy can last at least three to five years, Chapter 7 cases are much shorter, lasting only three to six months. This means you can get out of debt fast so that you can get on with your life.
- Recovery is also quicker—Your credit score gets better a year after your Chapter 7 bankruptcy has been completed. In fact, after two years following the completion of a Chapter 7 bankruptcy, you can be qualified by FHA for a home loan.
- No limitations on your debt amount—Unlike a Chapter 13 bankruptcy, there's no limit to how much debt you have.
- It gives you a fresh start—Most importantly, a Chapter 7 bankruptcy can help you start over, again.
Qualifications for Filing Chapter 7 Bankruptcy
To be able to file for Chapter 7 bankruptcy protection, you must first fulfill certain requirements:
- Complete credit counseling.
- Finish a debtor education course.
- Meet the income requirements, known as the means test.
Considerations and Warnings
- Although your cosigner won't be burdened with your debt, they're still responsible for any debts that you fail to pay.
- There are certain debts, such as child support responsibilities, that can't be removed by a bankruptcy.