Is Chapter 7 Bankruptcy Right For You?
If you are overwhelmed by debt, you may be considering Chapter 7 bankruptcy for relief. The process of Chapter 7 bankruptcy typically takes less than six months, and most people who file are still able to keep their belongings. In addition, debtors do not have to repay any of their covered debts. Here are a few questions to help you determine if Chapter 7 bankruptcy is right for you:
Does Chapter 7 bankruptcy cover all of my debt?
If you are feeling overwhelmed by your unpaid child support or student loans, Chapter 7 bankruptcy may not be for you. These types of debts are usually not eligible for discharge under this type of bankruptcy. In addition, unpaid taxes, home mortgages and car loans may not be resolved.
Most unsecured debts may be discharged. Here are a few examples:
- past due credit card balances and late fees
- personal loans from people you know
- medical expenses
- business-related debts
- overdue utility bills
- past due rent
- civil court judgments
Can I keep my property?
Chapter 7 bankruptcy does allow you to keep most of your "necessary property," such as your car or home. However, if you have offered some of your property, such as your vehicle, as loan collateral, you may have to relinquish it to the lender.
Am I eligible?
If your monthly income is less than that your state's median income for others who have the same number of people in their household, you meet the standards of the "means" test and qualify for Chapter 7. If you make more than the state median, your qualification will be based on additional components of the test, which use a mathematical formula to calculate your disposable income. If your disposable income is too high, you will not qualify for Chapter 7.
Nevertheless, you may still be eligible for Chapter 13 bankruptcy. However, with Chapter 13 bankruptcies, you are required to pay back a portion of the debt that you owe over a designated period of three to five years. The amount that you are required to repay and the repayment schedule adheres to a court-ordered budget that is based on your income. Once the repayment period has been successfully completed, remaining debts are discharged.
You may be able to benefit from Chapter 7 bankruptcy. However, you must meet the associated requirements. If you would like to learn more about Chapter 7, contact a bankruptcy attorney (like those at Bauer & French Attorneys at Law). He or she can help you review your income and debts to determine eligibility.
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