Trying to make ends meet can be difficult for many people, and they may find that they just can’t keep up with their debts any longer. While most people imagine bankruptcy as being a genie that pops up magically and takes away all your debts, this isn’t necessarily true. It isn’t quite so easy as that, and not every person will have the entirety of their debts eradicated. There are six bankruptcy chapters, but Chapter 7 is where most of your debts can be eliminated.
If you feel as though you can never get out of the financial rut you are in right now, then it’s in your best interest to speak with an experienced bankruptcy attorney about your options for financial relief. Your attorney can help clarify any questions you have about filing for bankruptcy, and whether the pros outweigh the cons.
What is Chapter 7 bankruptcy?
Chapter 7 bankruptcy may also be called “liquidation” or “straight” bankruptcy and is when the court chooses a trustee to manage your case, sell your assets, and then distribute funds from those sales to creditors. Creditors may not receive every dollar you owe them. Most estates under Chapter 7 bankruptcy do not have sufficient funds left over after selling off assets to pay what is due in total. These unpaid debts are often discharged and the debtor is no longer required to pay that money back.
What property of mine is exempt?
Under Chapter 7 bankruptcy, your trustee cannot take all of the assets you have to sell them off. You are allowed to keep exempt property, so you are not stripped of every single thing that you own or need in order to continue moving forward. There are federal and state statutes regarding bankruptcy asset exemptions, and may include the following:
- Retirement accounts
- Your home/residence
- Property that you need for work purposes
How can I prepare to file for Chapter 7 bankruptcy?
The best effective way to prepare to Chapter 7 bankruptcy is to first meet with an attorney to confirm that filing is the decision that makes the most sense for you at this time. In preparation for a meeting with your bankruptcy attorney, gather financial documents such as credit card statements, bank statements, pay stubs, loan paperwork, and anything else related to your finances and debts. With this information, you and your attorney can complete the petition for bankruptcy and other documents that must be sent to the court, such as:
- Voluntary petition for relief
- Declarations for debtor educations
- Statement of financial affairs
- Schedules of assets/liabilities
What is the “means” test?
This test of “means” is another document that has to be submitted with your bankruptcy filing. This is where a calculation is done to see if you can afford to pay off your debts, or do not have the means to pay at least an impactful portion of debts. Essentially, this means test compares your income with the average income for your state, and how much you spend in expenses compared to other people in your area.
Contact a bankruptcy lawyer today, to schedule a consultation.