Consumers may file for Chapter 7 bankruptcy in order to purchase themselves time to recover financially and pay off creditors. In a Chapter 7 bankruptcy, your nonexempt property is transferred to the trustee. The trustee will then liquidate the property (convert it to cash) and distribute the proceeds to your creditors.
Not everyone qualifies for Chapter 7 protections. Those who qualify include those who own real estate, are employed, and dwell or have a residence in the United States. You are eligible to register for Chapter 7 insolvency if you have not filed for Chapter 7 or Chapter 13 in the past six years.
After deciding to file for bankruptcy, your attorney must confirm your eligibility to do so. Your attorney will conduct a financial audit to determine if your financial situation is severe enough to warrant a Chapter 7 bankruptcy filing. During this time, your monthly income will be evaluated, and it must be equal to or less than the state's median income in order for you to qualify for Chapter 7 bankruptcy. Your rent or mortgage payment, food, and other monthly expenditures will be deducted from your monthly income.
If your income is at least $100 below the state's median income, you are eligible to file Chapter 7 bankruptcy. During Chapter 7 bankruptcy, which is distinct from Chapter 13 bankruptcy, your debts will be discharged and you will be given a fresh financial start.
The largest disadvantage of chapter seven bankruptcy is the elimination of your credit for at least ten years and the inability to borrow for at least two or three years, depending on when your bankruptcy is discharged. This is why the majority of reputable debt management and legal firms will advise you not to file for Chapter 7 bankruptcy unless it is your last resort.
In future articles, we will discuss Chapter 7 bankruptcy in greater detail, including the eligibility requirements for filing a claim and the short- and long-term repercussions of filing for Chapter 7 bankruptcy.
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