A look at Chapter 7 bankruptcy
Nobody wants to have to file for bankruptcy, and it is indeed a last resort. However, such a filing can be the right thing to do under certain circumstances, and today we will take a look at the Chapter 7 variety.
Chapter 7 bankruptcy is technically considered to be a “liquidation,” meaning that the debtor is required to surrender their assets to the Trustee who then sells these assets to pay back the creditors. For this reason, Chapter 7 bankruptcy is a good choice for people who don’t have property to surrender.
Plus, debtors who file for Chapter 7 bankruptcy are allowed to keep personal property that is deemed to be “exempt” under the law or because the Trustee feels as though the sale of the property will not result in significant recovery for the debtor. So you may also be able to hang on to your home, vehicle, or other financed assets when you file Chapter 7 bankruptcy, but the payments would have to be current or very nearly so, and the financing would have to be “reaffirmed” by your creditors.
There are income qualifications that one must meet to be eligible to file for bankruptcy. Since 2005, filers for Chapter 7 bankruptcy must undergo what is called a “Means Test.” Because the debt will be totally discharged and not restructured, Chapter 7 is only available to people who don’t “have the means” to repay the debt. So to qualify for this form of bankruptcy, you have to make less than what is considered to be the median income in the state. The United States Trustee updates this figure on a regular basis, but it is approximately $40,000 annually for a single person and around $60,000 for a family of three. If you can pass this Means Test, you are probably eligible to file for Chapter 7 bankruptcy.
One of the nice things about Chapter 7 bankruptcy is that the process is completed in just a few months, after which time you can begin taking steps to rebuild your credit. If you do not have significant assets to protect, Chapter 7 bankruptcy is very likely the proper course of action. And if you are able to keep the payments current, you may indeed be able to keep your vehicle, home, other financed property that the Trustee considers to be unlikely to sell for the amount that is owed on them.