In today's volatile financial times, many people face insurmountable debt. Mortgages and credit card payments are so high that it is a challenge for many people to even cover the interest that is accruing. Fortunately, the bankruptcy code of the United States provides several options for people who are struggling. One of the methods available to people is to file under Chapter 7.
This type of bankruptcy eliminates unsecured debts like credit cards, medical bills, and some personal loans. These are all called unsecured because they do not have any collateral assigned to them. For example you will not have to forfeit your house or your car if you were to default on these.
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By filing Chapter 7, you protect things like your home, your car, and your earnings from your job by protecting them from your creditors. It is also sometimes used to prevent foreclosure. It is important to note, however, when this type of filing is appropriate, so here is a list of the various situations for which it is appropriate.
People with a huge amount of credit and medical bills are able to file Chapter 7. Fortunately, in this situation, the benefit is fairly immediate and it will not require years to get a new start. It is necessary to go to court and go through several processes so be sure to hire a competent attorney.
Chapter 7 is also best for people who have very little income. This bankruptcy code is designed to help people who are drowning in debt and cannot possibly afford both to live and to service these bills. In order to qualify, a person must have an income below the bankruptcy means test. This is different in every state, but a person must have an income below it or else be able to show that the money they do earn is insufficient to cover at least part of the amount they owe. There are a number of resources both online and at the local bankruptcy attorney that will be able to help you determine eligibility.
Finally, a person filing this chapter of bankruptcy has very little property. This is not the right thing to do if you own several homes, a boat, some jet-skis and a timeshare on the water. Because it is a sort of liquidation, anything that is non-essential may be sold to service the debt. People are often allowed to keep their home, their car, and their clothes and personal effects but anything extraneous may be seized to recoup some of the losses.
Remember that going bankrupt will have an effect on your credit for ten years. Obviously if it has reached this point, your score is probably pretty badly impacted as it is, but nonetheless this is nothing to enter into lightly. Contact a lawyer and discuss your options and determine what your needs are and whether Chapter 7 serves them.
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