Chapter 7 Bankruptcy: How Does It Work?

Apr 06

Financial instability is an issue plenty of Americans are currently grappling with. Considering the state of today’s market, more and more people are finding themselves in the midst of growing debt. Consumer debt in the U.S. is at $11.4 trillion. This only shows how alarming the debt crisis is.

If you are among the many Americans struggling to pay off their mortgages, student loans, and other debt obligations, you might find recourse in filing for bankruptcy. Chapter 7 bankruptcy is one of the most suitable options for those seeking for financial relief.

The website of the Bradford Law Offices describes Chapter 7 as a form of bankruptcy that provides individuals a way to manage their existing debts through the liquidation of particular assets. A Chapter 7 bankruptcy is particularly helpful for those struggling with a huge amount in payments, as it can discharge or even eliminate part of the debt they’ve incurred.

The Chapter 7 bankruptcy process, which could take up to 4 to 6 months to complete, starts with filing an official petition, which includes a statement of all your financial affairs. This will include a complete list of all your assets and debts. It’s important to have appropriate financial and legal advice as you go through the entire process. Once the petition is filed, the court will impose an automatic stay and prevent creditors from contacting you about your payments or ceasing your property. The court will also assign a trustee, who will then be responsible for liquidating and distributing particular assets that have not been exempt. These exemptions are determined by bankruptcy law and are different from state to state.

There is a set of criteria that determines your eligibility to file a Chapter 7 petition. The court will have to consider a variety of factors, but they primarily assess your personal income. Chapter 7 bankruptcy is meant to be an option for those with pressing financial needs. The bankruptcy means test will help determine whether your income falls within a lower income scale.

Filing for bankruptcy can offer much needed financial relief. Before you go through the process, it’s best to learn which bankruptcy option is the best solution for you. A Chapter 7 bankruptcy is the appropriate avenue for individuals who need extra support for their current financial situation.

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