Facing excessive debt can make everyday life draining. Despite your efforts, paying off the amount you owe just seems impossible. In this situation, declaring bankruptcy might offer you relief from your financial burdens.
Benefits of Chapter 7 bankruptcy
Chapter 7 bankruptcy, known as liquidation bankruptcy, is a common solution for individuals who struggle to make regular payments to their debts. It involves liquidating assets to pay off creditors.
Its primary advantage is the discharge of qualified debts, meaning you would no longer need to pay those debts. Among them are medical bills, credit card bills and unsecured personal loans. Processing is often quick, and discharge can take four to six months to complete. Additionally, because it includes a court order called an automatic stay, it helps stop creditors from harassing you immediately.
Limitations of Chapter 7 bankruptcy
Not everyone can apply for Chapter 7 bankruptcy. One major requirement to be eligible is to pass the means test. In other words, your income must fall below the state’s median income to qualify. Typically, this type of bankruptcy is best for people without disposable or steady, regular income.
Declaring bankruptcy requires careful consideration. Although it can give you a fresh start, it does not erase all your problems. Chapter 7 can impact your credit score, making it difficult for you to make major purchases. There are also debts that may not be discharged, such as taxes, student loans, alimony or child support. Additionally, you might have to sacrifice certain assets during the process.
Before you make the decision to file for Chapter 7, it is advisable to weigh the advantages versus the drawbacks. A bankruptcy attorney may provide you with legal advice based on your unique financial situation.