Chapter 7 Benefits Debtors with Little to Lose

If you are thinking bankruptcy is the best way to end your financial problems, you may be wondering which chapters are the best for you. After all, not everyone is eligible for each one, or would even benefit from certain chapters. One route in particular, though, is often beneficial to certain debtors. Consider the best reasons for you to file chapter 7 bankruptcy.

If you have little to lose, this is probably the best option. This is because this route involves a trustee making a list of all your assets and then selling most of them, which is the only way some of your creditors get money from you. Once your property is sold and the profits are distributed, you should be done paying creditors, and your debt will be wiped out so you can get a fresh start. If you own a house with little equity, you will probably be allowed to keep it, but most people have to sell their home if they have a lot of equity in it so that creditors can get paid something. This means that for the first time, having hardly any equity may be a good thing for you. In addition, you can usually keep one car, as long as it is not worth much. If you happen to rent, do not have a car, and have few expensive possessions, you are in an even better position to declare chapter 7 since you have nothing to lose.

One thing that you may have never thought is that sometimes it pays to make little money. This is because to have the best shot at qualifying for chapter 7, you need to make less than the median income for your state. If your income qualifies, you do not have to go through the hassle of passing the means test like you would if you made more, as you are undeniably eligible for this route based on low income alone. This makes your job, as well as your lawyer's job, pretty easy.

Another thing to consider is the upfront expense of declaring chapter 7. Most lawyers charge a lot less for this route than they do for other chapters, such as 13. This is because they only have to do the work once in order to ensure your case is adequately filed with the court. With chapter 13, on the other hand, they have to help decide how much you can pay every month when paying back creditors, and they may need to be in contact with you for up to five years. Therefore, you take more of their time, which means that it is often the most expensive pathway.

If you think you may be a good candidate for this route, you should talk to a lawyer. Most offer a free consultation so that you can figure out the best path for you. It may turn out that other chapters actually suit you better, or that there is an alternative to bankruptcy altogether, which is why you should consult an attorney before filing.