Discharging Debts In Chapter 7 Bankruptcy

If your debt far outpaces your means to pay it, Chapter 7 bankruptcy can help you break the cycle. You can use this process to stop the endless phone calls from creditors and start rebuilding anew.

The majority of consumers opt for Chapter 7, where you immediately eliminate most of your debts, surrender any nonexempt assets (those that can be sold for the benefit of creditors), and go on your way.

Advantages Of A Chapter 7 Filing

Chapter 7 is often the best path forward if you:

  • Do not have expensive property, such as a brand new car, which may require liquidation to help pay debts
  • Stayed up to date on your home and vehicle payments
  • Are living paycheck-to-paycheck and do not have much money left after paying bills
  • Have not completed the bankruptcy process in the past eight years

Chapter 7, which is occasionally referred to as straight bankruptcy, is where a majority of your debts are completely eliminated and some of your property goes to creditors. There is no repayment, you go to court once and in three months you’re done. Most consumer cases fall into the class of no-asset cases, where you get to keep most of your possessions.

Disadvantages Of A Chapter 7 Filing

The law is not going to let you go from one spending spree to another with bankruptcy acting as your way out. If you file for bankruptcy today and the debts are discharged, you are not able to file again for another eight years. So, to file for bankruptcy, you need a lawyer who can walk you through the complicated process.

Another obstacle to Chapter 7 filing is the means test. This is a complex set of calculations used to identify whether you could pay a substantial portion of your bills and should be required to do so. The means test does not apply to debtors earning less than the state median income though.

The judge might also look for signs that you are filing for debt relief in good faith, which may involve:

  • The circumstances that led you to file for bankruptcy, such as sudden job loss or major illness
  • Your purchasing habits in the weeks before filing your petition, which could show any reckless last-minute spending with hopes of dissolving the costs through bankruptcy
  • The accuracy and attention to detail in your petition, which may show whether you take the process seriously

Learn More About Chapter 7 In A Free Consultation

To learn more about Chapter 7 bankruptcy and whether it may be right for you, call 630-912-5970 locally. You may also contact our firm online to schedule a free consultation.