When is filing for Chapter 7 bankruptcy a good idea?
Most people are unaware of the fact that the U.S. Bankruptcy Code reserves certain opportunities for those who are least likely to be able to repay their debts any time soon. Unlike Chapter 13 bankruptcy, which is available to most Americans, Chapter 7 bankruptcy is only available to low-income filers.
This opportunity is restricted to low-income filers because it doesn’t require debtors to repay their creditors before they can secure a discharge. This streamlined ability to achieve a fresh financial start makes this bankruptcy opportunity ideal for just about anyone who qualifies unless they’re trying to save a home from foreclosure. Under those circumstances, Chapter 13 bankruptcy is usually preferable.
Don’t fear Chapter 7 bankruptcy’s nickname
Many individuals shy away from the process of filing for Chapter 7 bankruptcy because they have heard that in doing so, they’ll lose all of their property. Chapter 7 bankruptcy’s nickname – “liquidation bankruptcy” – doesn’t do anything to help dispel this myth.
In truth, only a very small number of filers have some of their luxury property and other non-exempt assets sold by the trustee that is assigned to their case. The proceeds from this sale are used to repay creditors. However, this risk impacts very few Chapter 7 filers. Most people who meet the income requirements for Chapter 7 bankruptcy don’t need to be worried. They only own exempt property or so little non-exempt property that it is not worth a trustee’s efforts to sell it.
If you don’t earn much income and you’re struggling to repay your debts consistently, speaking with an experienced legal professional can help you to make informed choices about the debt relief options that are available to you. Depending on the nature of your circumstances, filing for Chapter 7 bankruptcy could help you to achieve a fresh financial start.