Bankruptcy can be a daunting prospect. Yet, like any new thing, once you break it down into manageable segments, you will realize it is not as difficult to understand as you first thought.
Chapter 7 is one of the two bankruptcy options you have as a person rather than a business. While often seen as the classic form of filing, it is generally quicker and easier than other forms of bankruptcy. Here are four of the most frequently asked questions about Chapter 7:
1. What debts can I use it for?
If you have medical debt, credit card debt or unsecured loans, then this may be the option for you. It can erase all of those. However, it cannot get rid of debt in the form of outstanding taxes or child support payments. Student loans are also probably not clearable by this or any other bankruptcy means. While the law does allow it, the criteria are so challenging to meet that few succeed.
2. Does it matter how much I earn?
Yes, it does. To apply for Chapter 7, you need to pass a means test. If your household income is above the median for the state, you will not be eligible and will need to consider a Chapter 13 filing. The same could apply if you have savings or other assets that a court considers could go toward paying off your debt.
3. Can I file if I have filed before?
Both Chapter 7 and Chapter 13 have time limits on how soon you can file again. The wait after a Chapter 7 will be longer. It is 8 years compared to six after Chapter 13.
4. Will I have to give up my house or car?
Maybe. That is the big disadvantage of Chapter 7. It is harder to retain such assets. That does not mean it is impossible. Getting help to assess your situation can help you understand what will and will not happen if you file for bankruptcy.