There are two main types of consumer bankruptcies, Chapter 13 and Chapter 7. In a Chapter 13, debts are reorganized, and a plan is made to pay them off. A Chapter 7 bankruptcy is much different. If you’re considering bankruptcy under Chapter 7, you may want to talk to a bankruptcy attorney who can help you determine the best course of action for your specific situation. Here are some general rules about Chapter 7.
Chapter 7 Is Debt Relief- Mostly
In a Chapter 7 bankruptcy, your nonexempt assets will be sold to pay off your creditors. You may be able to keep your house and car, provided you can still make payments on them. You will likely lose any property of value, real estate, annuities or stocks, but if you’re considering Chapter 7, you may not have anything of real value.
Under a Chapter 7, most of your debts will be wiped out. You can get out of a car loan, but you won’t get to keep the car. Not all debts can be discharged under Chapter 7. You will still be responsible for tax debt and penalties, student loan debt and child support debt. Your creditors can argue to the court that you should be obligated to repay the debt. It’s advisable to discuss your situation with an attorney to know if Chapter 7 will bring relief to your finances.
You Have to Qualify For Chapter 7 Relief
When you file Chapter 7, you disclose your financial information to the Court. You must fall under the guidelines for Chapter 7 bankruptcy in your state. Generally, there are income guidelines and asset rules. You may also have to attend credit counseling or bankruptcy classes before the debts can be discharged. Chapter 7 may alleviate your liability to pay off the debt, but it doesn’t discharge the debt from joint account holders. If a husband files for bankruptcy under Chapter 7, but his wife doesn’t, his wife will still be liable for any debts in her name even if the husband isn’t responsible.
Bankruptcy Isn’t Free
To file Chapter 7 bankruptcy, it does cost court and administrative fees. You should consider hiring a lawyer to help you through the process to make the most of your bankruptcy. The law is complex, and you want to make sure that you get through the bankruptcy to meet your goals. Most bankruptcy lawyers in Memphis, TN offer a free consultation to make sure they can help you before you undergo a Chapter 7.
Thanks to Darrell Castle & Associates, PLLC for their insight into bankruptcy law and chapter 7 bankruptcy.