Filing for bankruptcy offers much-needed debt relief to people who can’t keep up with their financial obligations. If you think a Chapter 7 bankruptcy can help with your financial situation, you should first understand how it works. Below are answers to some of the most common questions about the matter.  

What You Need to Know About Chapter 7 Before Filing

How does it work?

A Chapter 7 bankruptcy filing is called straight bankruptcy or liquidation. It means that a debtor must surrender their assets to a trustee—a person responsible for selling the property—as payment to the creditors. Unlike other chapter filings, the court will discharge any unsecured debts that remain after this process, eliminating your obligation to pay them.

Who can qualify for Chapter 7?

Not all debtors are eligible for Chapter 7—only certain individuals are. Moreover, they must pass the means test, which is a gauge that prevents high-income debtors from filing for Chapter 7 bankruptcy to eliminate their bills. To qualify, your disposable income must be below the state’s median income for the size of your household; otherwise, you must file for Chapter 13.

What are dischargeable debts in a Chapter 7 filing?

Chapter 7 bankruptcy eliminates some liabilities, particularly unsecured ones or those without a property attachment. It may include credit card bills, medical expenses, and other debts that the court deems dischargeable. However, bankruptcy will not wipe out taxes owed, mortgages and liens, student loans, child support, alimony, or loans that you obtain with malicious intent.

Do you have to give up all properties?

While Chapter 7 bankruptcy pertains to liquidating your assets, it is not equivalent to leaving you destitute. In Wisconsin, there are exemption statutes, and you can choose between using the state or federal exemptions. Also, there are properties and benefits that creditors cannot claim, such as retirement plans. If you have secured debts, you can keep the property that comes with it, as long as you continue its payments and sign a reaffirmation agreement. This agreement states that you plan to pay it off.

Is an attorney required when you file for bankruptcy?

No rule requires an attorney during bankruptcy proceedings. However, you should have one on your side to make it easier to handle the process. A simple misstep or oversight during the preparation process can result in more losses than benefits—something that a bankruptcy lawyer can help prevent. Additionally, you can face fines and punishment from the bankruptcy court if they believe that you misled them intentionally.

To know if Chapter 7 bankruptcy is the best debt relief option for you, reach out to Bender & Bender of Wood County, WI. For over 35 years, their attorneys have been offering top-notch legal expertise on bankruptcy law, creditor negotiation, and foreclosures to help clients overcome their financial woes. Visit the website for more information about their practice areas. Call (715) 423-4400 to set an initial consultation.