Bankruptcy Law: What You Should Know Before Filing Chapter 7

Bankruptcy law is a tangled web of rules and regulations. The average person could study these rules for the next six weeks and have only a moderate understanding of everything there is to know. Of course, that’s what lawyers are for, but so many people mistakenly feel that since it is legal to file without the assistance of a lawyer, that it is wise to do so. After all, money is a paramount issue to anyone in such a position. Still, there are a number of reasons why hiring a lawyer is the best move for your finances. Before you even go that far, however, here are some things you should know about filing for Chapter 7.

Bankruptcy law divides various filings into chapters. Chapter 7 is used when the individual wants to liquidate their assets in order to pay off their creditors. A trustee will be assigned to the case and will assist in doing just that, making sure the money made from sales get to the creditors who are waiting for their payout. Naturally, with filings such as these, there are plenty of people who want to take advantage of the system. Because of this, the rules and regulations surrounding this and other filings has gotten much more strict regarding who is eligible and what they may do.

Of course, many people who file for Chapter 7 have little in the way of assets that can be liquidated in the first place. Their primary goal is for the court to see this truth and discharge the debt because of it. In many cases, it works just like that. Creditors can then write off the debt as a loss, and the debtor can get on the road to financial recovery. Most unsecured debt is eligible to be discharged in this manner under the current bankruptcy law. This would include credit card debt, many medical bills, and any personal loans the individual might have received. Student loans and back taxes are not eligible in most cases.

In order to qualify for a Chapter 7 filing, you have to meet certain standards or minimum requirements. Eligible individuals will not have filed for Chapter 7 for the past 8 years, will not have received a discharge from a Chapter 13 filing in 6 years, have made no attempts at deceiving the court, and has an income level that is either equal to or under the median income level for the state in which they live. These minimum eligibility requirements can give you a good idea about whether or not filing for Chapter 7 is a possibility.

Even if you find that Chapter 7 won’t work for you, you should still contact a lawyer and find out what your available options might be. There are several solutions out there for people drowning in debt and you might be able to take advantage of one or more of them.