It’s never easy to make the decision to file for bankruptcy, although it may be your only solution if you simply have so much debt that you can’t pay it back. The process can be stressful and confusing, partly because there are different types of bankruptcy. About sixty-three percent of bankruptcies in the US are Chapter 7. Individuals and corporations can both take advantage of Chapter 7 and most people who apply for Chapter 7 bankruptcy are eligible to do so.
There are certain requirements for Chapter 7 bankruptcy, and a Terre Haute Chapter 7 lawyer can advise you whether it will work for you or whether you have other options, such as consolidating your debts. A Chapter 7 bankruptcy will stay on your credit report for up to ten years, making it extremely difficult to be approved mortgages or loans during that time.
You will still have to pay back some debts, such as alimony, child support, and student loans. Most people end up keeping their home and their car. and once you have filed, your creditors legally must stop harassing you for payment. You will no longer be responsible for unsecured debt, which includes debt from credit cards, consumer loans, medical bills, and store cards.
One way to tell if you qualify for Chapter 7 bankruptcy is to calculate your debts and your income. If the amount of your debt is over half of your income amount, it’s a strong indication that Chapter 7 may be appropriate for you. Even if you did everything possible to pay off your debts, but you couldn’t possibly pay them back within five years, that’s also an indication that Chapter 7 may be your best solution.
Most people that apply for Chapter 7 have almost no disposable income after paying their bills and debts and have monthly income that’s under their state’s median figure. All of this is addressed in what is known as a means test – basically, a comprehensive look at your overall financial situation which is used to determine whether you qualify for Chapter 7.
If your income is too high, you won’t be eligible for Chapter 7. Extra income such as property income, royalties, a pension, or child support, can all make a difference when it comes to determining eligibility. You aren’t eligible for Chapter 7 bankruptcy if you have filed and undergone Chapter 7 within the last six years. In some cases, a person filing for bankruptcy can be eligible for Chapter 13, rather than Chapter 7.
If you file for Chapter 7, you’ll also have to participate in a credit counselling class or course, one that is approved by your state. The counseling is partly intended to see if another approach to dealing with debt might be more effective, such as consolidating debts or another type of bankruptcy. It’s important to take the class seriously; not only can it be useful, but you will need to verify to the court that you had the counseling when you file for bankruptcy.