For most people, filing for bankruptcy is a life-altering decision. However, sometimes it’s the only way you can free yourself from debt, save your home, and regain peace of mind. If an experienced bankruptcy attorney suggested drafting a Chapter 7 filing, it’s wise to learn what it entails. Below is a guide that details Chapter 7 bankruptcy.

What Is Chapter 7 Bankruptcy?

This type of bankruptcy is meant for individuals with limited incomes who want to wipe out most of their debt and get a fresh start. A bankruptcy trustee will be in charge of selling your nonexempt property—like jewelry or artwork—as a means of partially repaying your creditors. In exchange, most of your unsecured debt will be discharged or wiped out. Unsecured debts are those that aren’t backed by collateral, such as credit card debts, medical bills, student loans loans, and court-ordered child support.

In contrast, secured debts are backed by collateral, such as a car or house. They can also be discharged, but the liens will remain. This means that creditors will have the right to seize your assets if you fail to make payments. For instance, a car loan may be discharged, but the car may still be taken by creditors. 

Why Does the Means Test Matter?

The “means test” is a tool used to decide whether or not a person’s income is low enough to qualify for Chapter 7 bankruptcy. If you don’t pass the means test, you have to file for another type of bankruptcy. Your bankruptcy attorney can help you explore other options and make corresponding decisions.

How Does the Chapter 7 Means Test Work?

The means test will compute for your monthly disposable income by subtracting particular monthly expenses from your present monthly income. If your disposable income exceeds your state’s median income, it’s unlikely that you will qualify for Chapter 7 bankruptcy. As an alternative, you will be asked to repay your creditors using your disposable income. 

You can download updated forms online to get started with the means test. You will also find other required forms for a Chapter 7 requirement. Your bankruptcy attorney can help you fill out the forms correctly, as well as help you gather pertinent documents related to tax returns, bank accounts, real estate, vehicles, and income.

Speak to an experienced bankruptcy attorney from Greene Law PC in Farmington, CT, if you want top-notch legal counsel for your case. They offer a personalized approach to providing legal representation in estate planning, personal injury, family law, bankruptcy, and other areas of practice. Call (860) 676-1336 to schedule a consultation or visit them online to browse their bankruptcy services.