If you cannot clear your debts and are frustrated by your creditors' harassment, you can file for chapter 7 bankruptcy. This form of bankruptcy clears your debt by liquidating your non-exempt assets. The court will appoint a trustee to assume ownership of your assets, liquidate them, and pay your creditors. Here is an overview of the rules of Chapter 7 bankruptcy law.
Before you file for bankruptcy, you need to undergo credit counseling. You don't qualify for bankruptcy without a credit counseling course from an accredited credit counseling agency. This is a one-hour session; therefore, you shouldn't worry about completing the course. Remember, the United States Trustee must acknowledge the credit counseling course.
After completing the credit counseling course, you must meet your state's income guidelines. If your income is within your state's income guidelines, you are eligible for Chapter 7 bankruptcy. Typically, your income has to be equal to or below the median income in your state. If your income is above your state's median, you still have a chance of qualifying for Chapter 7 bankruptcy if you pass the means test.
If you fail the income criteria, you don't qualify for Chapter 7 bankruptcy because you earn too much money. You can still pass the means test if you make more than your state's median income. Basically, you need to prove that your disposable income cannot pay your creditors. However, if you fail the means test, you could qualify for a Chapter 13 bankruptcy repayment plan.
Effects of Chapter 7 Bankruptcy
If you are eligible for Chapter 7 bankruptcy, the court will stop your creditor's collection efforts. The court will convene a meeting of creditors where they will discharge your debts after you are vetted. This means the court will issue an automatic stay order to prohibit creditors from claiming what you owe them.
It means creditors cannot garnish wages, levy your bank account, or seize your car or any other property. Chapter 7 bankruptcy also stops your creditors from filing a lawsuit against you. It is worth noting that some debts cannot be discharged. These include child support and spousal support obligations. Taxes are also not dischargeable. Therefore, it means you will still owe these debts.
Before filing for Chapter 7 bankruptcy, consult a bankruptcy lawyer. The professional will take you through the bankruptcy laws in your state and ensure you meet the criteria to file for bankruptcy. Additionally, your lawyer will help you understand the implications of the discharge. They will also walk you through the entire process, from gathering the required documents to filing for bankruptcy.
Contact a local bankruptcy law firm to learn more about Chapter 7 bankruptcy.