By Good Nelly
When you are neck-deep in debt and you've failed in your attempts to repay your debts with the help of several debt solutions, then you can take help of a lawyer to file a Chapter 7 bankruptcy. However, you’ll have to qualify for it. Go through this article to know how to qualify and how it can help you solve your present financial crisis.
Chapter 7 bankruptcy - Can you qualify for it?
- You need to satisfy the following criteria in order to qualify for filing Chapter 7 bankruptcy.
- Your current monthly income needs to be less than the median income of a household of your size in your state
- You should be a US resident
- You haven’t had a Chapter 7 Bankruptcy discharge within the last 8 years from the time you filed it
- Your bankruptcy filing hasn't been dismissed for any cause within past 180 days
How can you be benefited by filing Chapter 7?
- As a debtor, you can enjoy the following benefits when you file a Chapter 7 bankruptcy.
- You can get rid of your unsecured debt - You can get rid of your unsecured debts fast. For example, you’ll get rid of your credit card debts, personal loans, judgments, negligence claims, etc.
- Collection agencies will stop calling you - When you file Chapter 7, the bankruptcy court notifies your creditors and collection agencies. Usually, they’ll stop contacting you for payments.
- You can get discharge fast - You can get discharge from your debts in as little as 3-6 months of time. That is, it usually takes 3-6 months from filing the bankruptcy to getting discharge.
- You can obtain new credit within few years - After getting discharge, you can get new lines of credit in 1-3 years of time. However, you might have to pay relatively higher interest rate.
How Chapter 7 is better than Chapter 13 bankruptcy?
- Chapter 13 bankruptcy is another way to get rid of your debts. You can file a Chapter 13 if you don’t qualify for a Chapter 7. Chapter 13 bankruptcy is suitable for you if you don’t pass the Means Test for Chapter 7; that is, if your income is not low enough to file Chapter 7. However, Chapter 7 bankruptcy has certain advantages.
- You can start afresh - You can give a fresh start to your financial life by filing Chapter 7. You can be freed from your personal liability as most of your debts will be eliminated. However, you may not get discharge from certain debts such as, student loans, tax lien, lien on a mortgage, child support and alimony, etc.
- You can get discharge quickly - Chapter 7 bankruptcy is relatively quicker. It usually takes 3-6 months to file a Chapter 7 and get discharge from your debts.
- You can keep your future income - A property you acquire after 180 days of filing Chapter 7 will not be a part of your bankruptcy estate. This includes your inherited property, property from a settlement agreement or a divorce decree or proceeds from a life insurance policy.
- You won’t have to follow a repayment plan - In Chapter 7, you, as a debtor, won’t have to follow a court-approved repayment plan, like a Chapter 13 bankruptcy. You won’t be responsible for paying back the debt after you get a discharge.
- No limitation on amount of debt you include - If you file Chapter 7, there’s no limit on the amount of debt you can include.
Are there any disadvantages of filing Chapter 7?
In spite of these advantages, there are certain disadvantages attached with filing a Chapter 7 bankruptcy. First of all, it can stay in your credit report for 10 years. You will also lose property that’s not exempt from sale by the bankruptcy trustee. So, you might lose some of your luxury possessions. You also won’t be able to file another Chapter 7 within 8 years of time from the time you last filed Chapter 7.
However, after getting a discharge from Chapter 7 bankruptcy, you can manage your financial situation and work towards making yourself credit worthy to your future creditors. It may take some time to obtain a new credit card; however, once you get one, use it and make sure you repay the balance at every billing cycle. If you continue doing so, with time, you’ll be able to qualify for new credit at terms and conditions suitable to you.
Think you may qualify for a Chapter 7 Bankruptcy? Give us a call today for a free consultation at 757-320-2010.
Good Nelly is a financial blogger based in Milwaukee, Wisconsin and writes for sites like debtconsolidationcare.com. Her articles help others manage their finances and solve their money problems.