Filing for Chapter 7 bankruptcy relief can be the perfect solution to escaping overwhelming debt for many people. However, this debt relief option will not be right for everyone. Taking the time to review the facts outlined below can help you to determine if Chapter 7 bankruptcy may be right for you. If after reviewing these facts you believe that bankruptcy is the solution to your current financial problems, reaching out to a bankruptcy lawyer in your local area will be the next step towards enjoying the benefits that this debt relief option has to offer
#1: Chapter 7 Bankruptcy Relief Is Income Restricted
Not everyone will be eligible to file for Chapter 7 bankruptcy relief. To qualify for this debt relief option, you will first need to pass what is known as a means test. A means test is designed to determine whether or not you have the ability to pay off your debts without the use of bankruptcy relief. The first step in passing this means test is to compare your annual income to the average annual income in your state. If you make more than the average income, you will not be eligible for Chapter 7 bankruptcy.
Assuming you meet the income requirements for Chapter 7 bankruptcy, you will move on to the second half of the means test. This second step compares your income to your expenses to determine how much disposable income you have. If you have enough disposable income to pay off your debts you will be restricted to filing Chapter 13 bankruptcy.
#2: Not All Debts Can Be Discharged as Part of a Chapter 7 Bankruptcy
Once you have been officially cleared to file for Chapter 7 relief, you will need to answer the question of whether or not this type of bankruptcy relief is right for you. One very important factor to keep in mind when making this determination is that not all debts can be discharged as part of a Chapter 7 bankruptcy settlement.
Unsecured debts such as credit card debt, overdue utility payments, medical bills, and civil judgment are typically able to be forgiven when filing for Chapter 7 bankruptcy. However, secured debts such as a mortgage or current car loan are not able to be discharged. You will also be unable to discharge any debts that are accumulated after filing your bankruptcy petition.
#3: You May Be Able to Protect Your Assets From Seizure When Filing for Bankruptcy
If you are hesitant about filing for bankruptcy because you are afraid of losing your assets, you should know that many assets are actually protected from seizure by bankruptcy laws. These protected assets will typically include a modest home and vehicle, as well as personal belongings such as clothing and household furnishings. To determine whether or not any of your assets can actually be seized to pay off your debts, it is important to disclose all assets to a bankruptcy attorney before filing a bankruptcy petition.
Share30 August 2021
