What is Chapter 7 Bankruptcy?

What is Chapter 7 Bankruptcy?

Bankruptcy has the ability to give people a clean financial slate. Filing for Chapter 7 bankruptcy eliminates all of your unsecured debts (credit cards, loans, etc…), giving you a chance to build a solid financial foundation.

You can achieve good credit about two years after bankruptcy. Contrary to popular belief, bankruptcy does not mean 7 to 10 years of terrible credit. You will generally field credit card offers right after your bankruptcy ends. It will take around three years after bankruptcy to qualify for a mortgage.

In order to qualify for Chapter 7 bankruptcy you will need to satisfy three conditions.

  • You’ll need to have moderate to low income
  • You’ll need to carry a substantial amount of debt
  • You cannot own any significant property

Income Requirements

Your income is determined by where you live, your cost of living and what deductions are removed from your paychecks. Chapter 7 bankruptcy laws are designed to help and encompass a wide variety of situations. From single parents earning $55,000 a year to married couples making a gross income of over $100,000 a year, Chapter 7 bankruptcy is still a viable option.

Income levels are determined by the Census Bureau and provide a measuring stick for Chapter 7 bankruptcy qualifications. However, you can still qualify even if your income is higher than the guidelines. If you don’t qualify for Chapter 7 bankruptcy due to your income being too high then you might still qualify for Chapter 13.

Debt Requirements

Your debts are specific to your situation and don’t have to reflect a predetermined amount. Having a substantial amount of debt holds different meanings to different levels of income. Although a debt of $50,000 sounds crippling to someone who makes over $100,000 a year, a debt of $3000 can be equally crippling to a yearly income of $28,000. Each situation is different.

Property Requirements

When filing for Chapter 7 bankruptcy it is generally believed that all of your properties and belongings will be lost. Under the bankruptcy law those who file have a certain level of protection against seizure of their bank accounts, homes, cars and other assets up to certain values. Be aware that if your assets are above the allowed value limit, the Bankruptcy Court could sell them to pay your lenders. Although this is a possibility, most bankruptcy filers are allowed to keep their assets.

You might be entitled to choose between Federal exemptions and State exemptions, depending on which state you reside in. Each of these exemptions carry different laws that safeguard different assets in different ways. It is recommended to consult a lawyer to help protect your assets and receive an evaluation for bankruptcy.

If you would like to learn more from an actual bankruptcy lawyer, feel free to contact us at (844) 4 ZOCLAW for a free consultation.