What Is Chapter 7 Bankruptcy and Who Is the Best Candidate to File For It?
Chapter 7 is typically a bankruptcy section of the Unites States code that deals with liquidation, particularly if you have unsecured debts such as medical IRS debt, credit card bills, civil judgments, and personal loans. In you are buried in all these, Chapter 7 bankruptcy is the best option for you.
When it comes to the chapter 7, if not all, the bankruptcy trustee will cancel many of your debts. Alternatively, the trustee may decide to liquidate some of your properties to repay the creditors. This chapter is also known as liquidation or straight bankruptcy because the law is usually contained in the Chapter 7 of federal Bankruptcy code.
However, how will you know whether you are a good candidate for bankruptcy or not? It’s important to consider these factors.
If you have debts that you think would take over five years to repay all, have assets/properties at risks such as a home facing foreclosure, or you cannot be able to cover all your daily expenses and repay debts with your current income, then you are a good candidate for this particular bankruptcy. However, negative effects and exemption limitations on some credit records and careers mean bankruptcy isn’t the right choice for you, even if you have overwhelming debts.
Many types of debt aren’t dischargeable in chapter 7. For instance, child support, most taxes and a few other types of court obligations for family cannot be discharged in bankruptcy, even though you may have a temporary reprieve from paying off these debts while being active in the court process.
Cash advances or luxury goods over a certain amount of money within some months of filing bankruptcy are also not dischargeable in this chapter. Additionally, most student loans are not discharged as well except in extreme hardship cases. So, if your debts are basically of these non-dischargeable kinds, bankruptcy is not the right option for you to manage your debt load.
Your monthly income also determines a lot when it comes to this chapter. For instance, if you are working steadily, but relatively less than an average person in your area, or if you have been out of work for some time, chapter 7 can be a good option to consider.
If you are expecting an inheritance of a property or other windfall from someone is something you need to discuss seriously with your lawyer. It would be bad timing to file for such bankruptcy process just as you get a large amount payout. The funds you receive would go directly to your creditors.
If you have limited credit cards or you have high credit card balance, paying high interest that cannot effectively bring your credit balance down, it’s recommended to opt for chapter 7 if you don’t want to be stuck with the same debts for several years.
In a nutshell, other circumstances that may make you a good candidate for Chapter 7 bankruptcy can be when you have outstanding medical bills as a result of long, expensive illness, or when you have some high value properties or assets you want to keep.
Conclusively, bankruptcy may also trigger a closer look into the financial management of debtors in military and security clearances may be removed or adjusted if the bankruptcy shows fiscal irresponsibility instead of reasonable choices under unavoidable circumstances such as medical debt or unemployment.