Is Chapter 7 Bankruptcy Right For You? How An Attorney Can Help You Decide
Chapter 7 bankruptcy can often seem like the perfect option for people who are facing a lot of debt that they simply do not have the resources to pay. However, the fact is that filing for Chapter 7 bankruptcy will not be the best option for all debtors. In fact, in some cases, choosing to seek bankruptcy relief can actually do more harm than good. That is why it is important to consult with a bankruptcy attorney before moving forward with your intent to file for bankruptcy. As part of this consultation, your attorney will take a closer look at your financial situation and determine whether or not Chapter 7 bankruptcy is right for you. Continue reading to learn more about how they will accomplish this task.
Are You Eligible?
The first thing that your bankruptcy attorney will do is to determine whether or not you are eligible for Chapter 7 bankruptcy relief. After all, there is no point in going further with this idea if you do not qualify under current bankruptcy laws.
The way that this determination is made is by applying what is known as a means test. The reason for this test is to ensure you meet the income qualifications for filing Chapter 7 bankruptcy. In order to qualify, your income for the previous year must be less than the average income in your area.
Will You Benefit from Chapter 7?
Even if you qualify for Chapter 7 bankruptcy, you may not ultimately end up benefiting from this debt relief option. This is because only certain debts can be addressed as part of a Chapter 7 bankruptcy case. For instance, secured debts such as a car loan or mortgage cannot be discharged as part of a Chapter 7 bankruptcy case. On the other hand, medical and credit card bills are routinely discharged using this debt relief option. Consequently, your bankruptcy attorney will take a very close look at exactly what debts you owe in order to determine whether or not you will be able to benefit from the debt relief that Chapter 7 bankruptcy offers.
During this process, you can also expect your attorney to take a close look at all of your assets. This is important in order to determine whether or not your assets will be subject to seizure in order to pay off some or all of your debts. If the value of the assets you will lose exceeds the value of the debts that can be discharged, it will not be in your best financial interest to file for Chapter 7 bankruptcy. In this situation, you may find that Chapter 13 bankruptcy suits your needs better.