This form of bankruptcy discharges unsecured debts, such as credit cards, medical bills, and certain personal loans. All of these are termed unsecured because no collateral is designated to them. For example, you will not be required to forfeit your home or vehicle if you default on these obligations.
By filing for Chapter 7 bankruptcy, you shield assets such as your home, vehicle, and income from your job from your creditors. Occasionally, it is also used to prevent foreclosure. However, it is essential to note when this type of filing is appropriate, so here is a list of situations in which it is acceptable.
Chapter 7 bankruptcy is available to individuals with substantial credit card and medical debt. In this case, the benefit is relatively immediate, and it will not take years to get a fresh start. It is necessary to appear in court and endure multiple procedures, so be sure to retain a competent attorney.
Chapter 7 is also ideal for individuals with a modest income. This bankruptcy code is intended to assist individuals who are so indebted that they cannot afford to both live and pay their expenses. To qualify, a person's income must fall below the bankruptcy means test threshold. This varies by state, but a person must either have an income below it or demonstrate that their income is insufficient to cover at least a portion of their debt. There are a number of online and local bankruptcy attorney resources that can assist you in determining eligibility.
Lastly, a person who files under this chapter has very few assets. This is not the correct action to take if you own multiple residences, a boat, jet skis, and a waterfront timeshare. Because it is a form of liquidation, all non-essential assets may be sold to pay off the debt. People are frequently permitted to retain their residence, automobile, clothing, and personal effects, but anything extraneous may be seized to recoup losses.
Remember that declaring bankruptcy will have a ten-year impact on your credit score. Obviously, if it has reached this stage, your score is likely already severely impacted, but you should not enter into this lightly. Contact an attorney to discuss your options, determine your needs, and determine if Chapter 7 meets them.
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