When debts overwhelm you, bankruptcy might be the only alternative. The process of filing for bankruptcy is not easy and even more difficult if you decide to handle it without the help of an attorney. The type of filing will depend on your financial situation. Chapter 7 bankruptcy is the most popular type of filing. It can be filed by married couples, organizations, and individuals.
What is Chapter 7 Bankruptcy?
Chapter 7 bankruptcy is also known as liquidation. In this type of bankruptcy, you will have to give up assets however, there are exemptions for property that cannot be seized when filing for bankruptcy. This will depend on the state you live in.
In the same way, there are exempt debts, that is, debts which cannot be forgiven even in bankruptcy. For instance most student loans and child support cannot be discharged. After filing for Chapter 7 bankruptcy you will only remain with exempt assets. You will be forgiven most of your debts.
When Is Chapter 7 a Good Idea?
While Chapter 7 is the most popular form of bankruptcy, there are situations in which a different type of bankruptcy would make more sense. That’s because Chapter 7 comes with certain limitations and restrictions that may not match your financial situation.
The best way to determine the right choice of bankruptcy for you is to go over your situation in detail with an experienced team of bankruptcy lawyers. Generally speaking, though, Chapter 7 is a good idea for people who:
- Are in more debt than they can easily get out of without the assistance and protection of the bankruptcy process, and
- Have a family income that is equal to or less than the median family income in the state of Washington (or who otherwise qualify for Chapter 7 under The Means Test, see below), and
- Understand that they might lose certain property, such as a home or a car, if they are behind in their payments on that property,
If any of these three statements is not true for you and your family, then a different form of bankruptcy might be more appropriate for you. A lawyer can help you decide.
The Means Test
To be allowed to file Chapter 7 bankruptcy, you must pass the means test. This test was put in place to ensure that people with a high income do not take advantage of this system. In order to qualify for Chapter 7 filing, your income should be lower than the state median. Remember that these income calculations vary depending on the state in which you live.
How to File for Chapter 7 Bankruptcy
Before filing for any type of bankruptcy it is important to speak with the right legal expert who will advise you on the best alternative to take, including which form of bankruptcy is best for your situation and what you qualify to do. If you do not have the money to pay an attorney then seek pro bono representation. A lawyer’s advice is critical because you do not want to make the wrong filing.
A lawyer will help with Chapter 7 bankruptcy filing paperwork. You will need accurate information regarding your debts, assets and leases among other things in order to fill these forms correctly. Remember that there are filing fees which you may need to pay unless you qualify for a fee waiver. The good thing about filing the petition soon is that it prevents most of your creditors from contacting you and pursuing lawsuits against you.
In most Chapter 7 bankruptcy filings, you will never have to meet with a judge. You will need to meet with some creditors and with the bankruptcy trustee. Chapter 7 filings will stay on your credit report for 10 years and you will have to complete a debtor education course.
Can I File for Chapter 7 Bankruptcy On My Own?
Technically, yes. There is nothing in Washington or federal law preventing you from navigating the Chapter 7 bankruptcy process by yourself. But it’s never a good idea. Bankruptcy law is extremely complex, and it’s all too easy to make costly mistakes. Your interests run counter to those of your creditors, who are typically aggressive and quite knowledgeable of the law. If you’re going to go through this process, it’s important to make sure you dot every “i” and cross every “t” so that you protect yourself as prudently and as comprehensively as possible.
When you hire a lawyer, you’re taking the burden off your shoulders and entrusting it someone who knows how to handle bankruptcy the right way — lawfully, strategically, and along a timeline that keeps you in compliance and makes sense for your family.
Don’t Lose Any More Money, Now Is the Time to Act
Once Chapter 7 bankruptcy is on the table, one of the biggest mistakes you can make is waiting too long to actually file. While no one should rush into a bankruptcy decision, excessive delay only causes the sinkhole of debt to grow deeper.
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