Chapter 7 Bankruptcy: What It Is and What It Isn’t
Dealing with insurmountable debt can be overwhelming. You might think that there’s no way to resolve your financial problems, but there’s a way to deal with your problem. Bankruptcy is one way you can improve your financial situation. Consult with our experienced Raleigh bankruptcy attorneys today to get help with your debts.
What Is Chapter 7 Bankruptcy?
Chapter 7 bankruptcy is also known as liquidation bankruptcy. When you file for Chapter 7 bankruptcy, most if not all of your debts get discharged. This includes:
- Credit card bills
- Medical expenses
- Personal loans
- Utility bills
- Business debts
- Tax penalties
- Social security overpayments
- Veterans assistance loans
However, there are also non-dischargeable debts which Chapter 7 can’t wipe out. This includes:
- Certain tax debts
- Child support
- Student loans (with a few exceptions)
- Debts for a personal injury case
- Criminal court fines and fees
While these debts are non-dischargeable in Chapter 7, you can eliminate some of them in Chapter 13. Consult our experienced Raleigh bankruptcy attorneys to know more.
The Chapter 7 Means Test
There are different bankruptcy types available for individuals struggling with debt, and Chapter 7 bankruptcy is the most common type of bankruptcy filed. In fact, according to The Administrative Office of the U.S. Courts, 62.4% of personal bankruptcy cases filed annually are Chapter 7 cases.
To file a Chapter 7 bankruptcy, you must pass the bankruptcy means test. This test aims to examine your financial records, assets, secured and unsecured debts. It also determines whether you have enough disposable income to repay your debts.
If your income is below the median income in North Carolina, you are eligible to file for Chapter 7 bankruptcy.
The Automatic Stay
A court order called the automatic stay stops most civil lawsuits filed against you by your creditors, collection agencies, or government entities when you file bankruptcy.
Bankruptcy can temporarily or permanently help if you’re at risk of losing your home, getting your car repossessed, losing a portion of your salary through wage garnishment. You can prevent the risk of getting your utilities cut off as well.
Common Misconceptions About Chapter 7 Bankruptcy
Although Chapter 7 is the most common type of bankruptcy filed in the U.S., many misconceptions about it make debtors apprehensive about filing for bankruptcy.
You Will Lose Everything in Bankruptcy.
Although some of your properties may be sold off to pay your creditors, these are only properties that are non-exempt in bankruptcy.
Bankruptcy aims to give you a fresh start, and not make your life even more difficult. This means that you can keep your properties (exempt properties) such as:\
- Your home and household furnishings
- Tools for your profession
- Your car (up to a certain value)
- Your retirement account
Bankruptcy Will Badly Affect Your Credit Score.
This is probably the biggest fear of debtors who are thinking of filing bankruptcy. While it is true that your credit score will take a dip after filing bankruptcy, it was probably already bad prior to filing bankruptcy. A competent bankruptcy attorney can help you rebuild your credit after bankruptcy.
Bankruptcy Filing Is a Sign of Bad Financial Habits
There are many reasons why a debtor why choose to file bankruptcy. While often seen as a last resort, bankruptcy provides relief for people struggling with debt usually brought about by unforeseen circumstances.
Why You Should Consider Bankruptcy
If your debt is piling up and it is getting harder to manage it, then bankruptcy might be for you. Facing insolvency and having little to no ability to pay back your debts can be overwhelming. If you need help getting relief from your debts, then Chapter 7 bankruptcy can help you get a debt-free future.
Don’t let yourself be overcome by financial problems; let our Raleigh Chapter 7 bankruptcy attorneys help you get a fresh start in life. Schedule a consultation with our North CArolina bankruptcy law firm today to know more about the Chapter 7 bankruptcy process.