Filing for bankruptcy is never an easy choice.
But sometimes, it can feel like the only way to escape the vice grip of debt and move on with life.
Most personal bankruptcy filers will turn to a Chapter 7 bankruptcy, which offers almost total debt forgiveness and a quick discharge time.
But before you can get a fresh start from a Chapter 7 bankruptcy, you should know the basics — and what to expect from the bankruptcy process.
What Is Chapter 7 Bankruptcy?
In researching your options, you’ll find there are two common types of bankruptcy for individuals and couples: Chapter 7 and Chapter 13. While similar in many ways, they differ in some big areas.
Chapter 7 bankruptcyalso known as “liquidation bankruptcy,” is a bankruptcy by which individuals or couples who are deemed to not have a high enough income to pay back debts can absolve themselves through liquidating their assets. You can include both secured debts and unsecured debts.
If the liquidation doesn’t cover the entire debt, then the remaining balance is typically forgiven.
Chapter 13 bankruptcyalso known as “wage-earner bankruptcy,” is for those whose income or other qualifiers make them ineligible for Chapter 7.
These individuals or couples will work with a trustee to create a payment plan lasting three to five years to repay most of their debt, and they won’t have to liquidate any assets unless they choose to.
Of the two, Chapter 7 is by far the most popular. Here’s how to determine if you qualify and how to file.
A Chapter 7 bankruptcy can discharge a wide array of debt — credit card debt, tax debts, medical bills, personal loans, payday loans, even some types of student loans.
Before You Can File for Chapter 7 Bankruptcy
Before you file, you’ll have to determine if you qualify for Chapter 7 bankruptcy. Seeking professional advice from a bankruptcy attorney is the only real way to determine your eligibility, but if you haven’t committed to…