What to Consider Before Filing For Chapter 7 Bankruptcy-

Chapter 7 Bankruptcy is one of the most common types used by individuals. If you are contemplating bankruptcy filings, this Chapter will allow you to regain a fresh financial start relatively quickly. Determining whether or not this is the right Chapter for you depends on the type and amount of debt you are in, as well as the property you own. Only certain types of unsecured debts are discharged, such as medical bills and credit card debts. If you owe a large amount of money to a government agency because of criminal activity, this is an example of the type of debt that will not be discharged. Other types of debt that are not erased by Chapter 7 include child support and alimony, income tax debt, and some student loans.

In addition to the type of debt you have, the actual amount owed is another factor to consider. Chapter 7 bankruptcy is available for individuals who do not have enough income to pay their debts. Since 2005, new bankruptcy laws include a means test that individuals must take to file under this Chapter. This test measures your debts, income, and assets to determine your true need to file bankruptcy. Your income is compared to the average income in your state, and your presumed expenses are subtracted from your average income. This test determines whether you qualify for Chapter 7. If you do not, you may need to file under Chapter 13, which consolidates your debt into a manageable payment schedule instead of discharging those debts.

The property you own is also considered when determining your eligibility to file for Chapter 7 bankruptcy. This type of bankruptcy is typically best for people who do not own much property. Some types of property are protected from liquidation, but this varies among state laws. In many states, you are able to keep your home, car, furniture, appliances, and some other items. These Chapter 7 exemptions allow you to keep valuable property during and after the bankruptcy proceedings. 

Once you have filed for Chapter 7 bankruptcy, creditors are restricted by law from taking any action against you to collect the debt. Creditors often try to collect a debt through lawsuits, wage garnishments, and harassing phone calls. All of this activity must cease as soon as your bankruptcy documents are filed in court. The process usually takes 3 to 5 months before you are discharged from your debts. Afterward, you can begin to rebuild your credit. The bankruptcy filing will stay on your credit report for 10 years, but you will still be able to build good credit during that time. Many banks offer secured credit cards for people trying to reestablish credit. With a secured credit card, you put a certain amount of money in a bank account, and you are able to charge up to that amount on the card. Some financial institutions will reward you for good payments by adding to your credit limit without any additional deposits. 

To determine whether Chapter 7 bankruptcy is right for you, many bankruptcy lawyers offer free consultations. You can get sound legal advice from an expert without having to pay any of your limited funds for it. If Chapter 7 is your best option, it will typically cost around $300. Fees for your bankruptcy lawyer will vary, but are around $1000 to $2000 on average.