Overcoming Personal and Legal Challenges

Overcoming Personal and Legal Challenges

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What is Chapter 7 bankruptcy?

If you feel overwhelmed by medical debt, credit card debt or another type of debt, you may have considered bankruptcy as an option to help you move forward financially. There are two types of consumer bankruptcy you can file: Chapter 7 bankruptcy and Chapter 13 bankruptcy.

According to the U.S. Courts, when you file Chapter 7 bankruptcy you do not have to adhere to a repayment plan like when you file Chapter 13 bankruptcy. Instead, a trustee will collect your nonexempt assets and use their value to pay back your creditors.

Eligibility for Chapter 7 bankruptcy

To file Chapter 7 bankruptcy, you must meet certain eligibility requirements. For example, your income level must be lower than the median income amount for other similar households in your state. You cannot have filed Chapter 7 bankruptcy in the past eight years, and you typically must complete an individual or group financial counseling course.

The Chapter 7 bankruptcy process

When you decide to file Chapter 7 bankruptcy, you must start by filing a petition with the bankruptcy court. When you file this petition, an automatic stay occurs, so that creditors can no longer take action against you or your property. The trustee will then collect your nonexempt assets, pay off a portion of your debts using their proceeds and then clear you of your existing debts.

Moving forward with the Chapter 7 bankruptcy process is a major decision that can affect your credit score and your finances. Before filing your petition, carefully consider the advantages and drawbacks of filing bankruptcy to help you get out of debt.