The reason why Chapter 7 bankruptcy is popular among debtors is that most of their unsecured debts, without collateral, are protected under a federal court. So, it is important to know what is Chapter 7, how long does Chapter 7 take and can you do without Chapter 7 bankruptcy attorney.
Is Chapter 7 the right option for me?
If you are filing for bankruptcy, Chapter 7 bankruptcy is right for you, if…
…you don’t possess many assets.
…your repayable debts are more than half of your annual income.
…these debts can be discharged under Chapter 7.
…you are ready to pay off your debt in a period of five years or more.
In case Chapter 7 is not suited for your purpose, you can explore Chapter 13 bankruptcy. This is ideal for those with more assets or secured debts, who have the ability to repay some or all of their debt.
Do you qualify for Chapter 7 bankruptcy?
Whichever option you choose for filing bankruptcy, you will need to qualify for it. The eligibility requirements for Chapter 7 bankruptcy are:
● Passing the means test, a mathematical formula that involves your income, assets, and expenses.
● Not filed Chapter 7 in the past eight years or Chapter 13 in the past six years.
● Chapter 7 or Chapter 13 filing should not have been dismissed in the last 180 days, due to your failure to appear in court or not complying with court orders or voluntarily quashed by you.
How to file Chapter 7 bankruptcy?
Let’s jump right into the stepwise process of filing Chapter 7 bankruptcy:
#1 Pre-bankruptcy credit counseling
This mandatory requirement is to be fulfilled within 180 days before filing. You need to take this counselling from a nonprofit credit counseling agency.
#2 Hiring an attorney
Since bankruptcy proceedings are complex, it requires a qualified bankruptcy attorney. Filing chapter 7 on your own may get your case dismissed or thrown out.
#3 Filing paperwork
Your attorney will complete all paperwork that includes information on your assets, income, and debts. What happens after filing chapter 7 is you get an automatic stay that prevents your creditors from suing you or contacting you in any manner.
#4 Appointment of trustee
The court appoints a trustee to manage the process, once you file your petition.
#5 Creditors meeting
The trustee is responsible for organizing a meeting between you and the creditors, along with your attorney. This is to facilitate creditors, as also the trustee, to examine you as regards your forms and finances.
#6 Handling of non-exempt property
Trustee assesses whether your non-exempt assets, such as jewelry or equity on your house or car are higher than the state’s exemption limit and whether they are sale worthy for distributing the proceeds to the creditors.
The bankruptcy court takes about three to six months to discharge your case, that forgives your eligible debts and closes the case.
What to do after bankruptcy case closes?
You will need to rebuild after bankruptcy by making a financial plan and adhering to it. Also restore your credit by making timely payments, keeping low credit balances and the like.
Bankruptcy is never a pleasant experience, but if you take the right steps, it will not only smoothen the process but also help you save your assets.