Chapter 7 bankruptcy is what many people think of when they consider filing for bankruptcy. This is the chapter that allows for the complete elimination of dischargeable debt, relieving the burden of medical, credit card, and other types of debt that may be weighing a person down.
Does your particular case qualify for Chapter 7 bankruptcy? Here are a few ways to determine whether this chapter is the right one for you – and what to do, if so:
The Means Tests
One of the most important determining factors in whether your bankruptcy case meets the requirements for Chapter 7 is The Means Test. The Means Tests was established by Congress as a way to ascertain whether individuals are capable of paying their bills and covering basic expenses with their current income and assets. If not – if your debt has impacted your finances so severely that you are no longer able to make ends meet sustainably – then you are very likely to be a candidate for Chapter 7 bankruptcy.
What Types of Debt Can Chapter 7 Eliminate?
Knowing that Chapter 7 bankruptcy can eliminate a person’s obligation to repay debt can be an attractive reason to consider filing – but what types of debt does this type of bankruptcy discharge?
Most personal debts are eligible for discharge through Chapter 7 bankruptcy, but there are several exceptions. Taxes from recent years, court-ordered payments such as child support or alimony payments, student loan debt – unless a hardship can be established – and debt incurred as a result of “bad acts” are all ineligible for discharge through this type of bankruptcy. If the bulk of your debt is due to student loans, be sure to speak to your legal counsel about whether a hardship situation applies for you, so that part or all of that debt can also be forgiven as part of your discharge.
Risk vs. Reward
It is important to remember that while the point of Chapter 7 bankruptcy law is not to punish those who are in debt, the forgiveness of debt does require sacrifice on the part of debtors to offset the costs that they cannot pay. This often includes the remittance of property such as a home or vehicle, or other valuables that can be sold by creditors to offset the cost of discharged debts.
While this may sound like a steep price to pay, for those who are struggling with insurmountable debt it can be a great deal. For a fresh start and a new lease on life, Chapter 7 can set you free from debt in as little as four months – as long as you are willing and able to go through with it.
For more information, discuss the details with the legal experts at the Law Office of Larry P. Karandreas, PLLC.