Nobody takes on debt with the intention of discharging it in bankruptcy someday. Life is unpredictable, and many Americans find themselves unable to pay back the money they borrowed. If you’re experiencing this situation, declaring chapter 7 could be the answer. Here's what you should know about this strategic approach for regaining your financial footing.
What Happens to Assets & Debts During Chapter 7?
Chapter 7 is often called liquidation bankruptcy because petitioners must sell certain assets to pay back creditors. These assets are considered nonexempt and might include vacation properties, newer vehicles with equity, musical instruments, valuable collections, investments, artwork, and jewelry. After all nonexempt assets are liquidated, the bankruptcy trustee will use the funds to pay back lenders.
Exempt assets are those that you may keep during the proceedings, like necessary furniture and appliances, pensions, and a portion of the equity in your primary residence.
Who Is a Good Candidate for Chapter 7?
Chapter 7 bankruptcy is ideal for those who have little disposable income left to pay back their debts after covering the necessities. You may be a good candidate for chapter 7 if you can barely cover essential living costs.
To confirm your eligibility, the bankruptcy court will require you to pass a means test. If your annual income is less than the state’s median income for a household of the same size, you’re eligible to declare chapter 7.
It’s also wise to consider the kinds of debt you owe before filing. If your debt is comprised of revolving credit, medical expenses, and past due utility bills, chapter 7 could provide much-needed relief. If it’s comprised of child support obligations, tax debts, and student loans, declaring bankruptcy won’t provide a clean slate because these aren’t typically dischargeable.
If you’re thinking about filing for chapter 7 bankruptcy, turn to The Gil Law Firm for assistance. Located in Dothan, AL, this firm represents clients throughout the states of Alabama, Georgia, and Florida. For nearly two decades, they’ve been helping clients protect their financial security and aiding with personal injury suits and Social Security disability. Call (334) 673-0100 to schedule a consultation or view their testimonials online.