The vast majority of people are trying their best to do what they can with what they have. However, sometimes circumstances prevent people from covering all of their expenses. This can get to the point where large amounts of debt can influence every single decision you make and drastically increase levels of stress. Even so, there may be options available.
While it has consequences on the rest of your life, declaring bankruptcy can provide you with an opportunity to rearrange your finances and to get your financial feet back on solid ground. There are multiple types of bankruptcy, but depending on your circumstances chapter 7 bankruptcy may be your best option.
What exactly is chapter 7 bankruptcy?
Unlike some other forms of bankruptcy, chapter 7 bankruptcy provides people with a clean slate. Instead of creating a payment plan for existing debts (which is what is done in chapter 13 bankruptcy), debts are cancelled or liquidated by a trustee. It is called chapter 7 bankruptcy because the particular law is found in chapter 7 of the federal Bankruptcy Code.
It should be noted that there are certain types of debts that cannot be removed. Some of these types include,
· Student loans
· Child support
How do you qualify?
In order to qualify for chapter 7 bankruptcy, the income of the person filing must be equal to or less than the median income of the individual’s state. Every state has its own particular criteria, but income level is one of the primary determining factors.
Before you can actually file for chapter 7 bankruptcy, you must first complete credit counseling with an agency that is approved by the United States Trustee. When this has been completed, the person filing can submit their application to the local bankruptcy court. The application for bankruptcy does have a fee that is usually a few hundred dollars.
What are the benefits?
Although there are many downsides to filing for bankruptcy of any kind, the pros can sometimes outweigh the potential cons. Some benefits of filing for chapter 7 bankruptcy include,
· Freedom from most types of debt
· Many types of property are exempt, so you can maintain possession of them
· An automatic stay that prevents debt collectors from trying to collect payments
While these benefits can be substantial, filing for bankruptcy will have a significant impact on many aspects of your life for many years to come. It is a decision that should never be taken lightly, but if you believe that this is the best option for your situation it is highly recommended that you seek out the services of a knowledgeable and experienced legal professional. They will be able to work with you to move throughout the legal process and to achieve the best outcome possible.