Deciding to file for Chapter 7 bankruptcy is a significant step that will impact your financial future. This type of bankruptcy can offer a fresh start by discharging certain debts.
Before moving forward, you should understand what Chapter 7 bankruptcy entails and how it could affect your life.
Understanding Chapter 7 bankruptcy
Chapter 7 bankruptcy allows individuals to erase most of their unsecured debts, such as credit card debt and medical bills. In this process, a trustee sells any non-exempt property to pay back creditors. You cannot discharge all debts in Chapter 7. You will remain responsible for child support, spousal support and student loans.
Reviewing eligibility requirements
To qualify for Chapter 7 bankruptcy, you must pass the means test. It compares your income to the median income for a household of your size in your state. If your income is too high, you may have to file for Chapter 13 bankruptcy instead.
Deciding to move forward
Chapter 7 bankruptcy lets you eliminate many types of debt and start fresh. However, filing does impact your credit score, making it difficult to obtain loans or credit cards for several years.
If you feel overwhelmed by unsecured debt, it might be worth considering this route. If you have significant non-dischargeable debts or valuable non-exempt assets, you may want to explore other debt-relief options.
Nearly 240,000 people filed for Chapter 7 bankruptcy between October 2022 and October 2023. Before making a decision, thoroughly assess your financial situation, including your debts, assets and income.
