One misconception is that you lose everything when declaring bankruptcy—but the opposite is true. In most Chapter 7 cases, the debtor does not give up any of their assets; this protection is possible thanks to exemptions that entitle you to defined basic possessions.
Similarly, bankruptcy can be a better choice than trying to pay off your debt, and it is also not a permanent mark on your credit report history. The key is knowing when and how to file for Chapter 7, so you can put yourself in the ideal situation for the future.
When to File for Chapter 7 Bankruptcy
Chapter 7 can be your best financial move in several scenarios. You might want to absolve unpaid medical bills, earn tax forgiveness, or reclaim a repossessed vehicle. As a rule of thumb, you should consider filing if:
- You have $10,000 or more in debt that you have been unable to pay back
- Your credit score has fallen below 600
- You do not own expensive property
While these scenarios outline when you can file, it is just as important to know if you can file in the first place. Not all people are eligible for Chapter 7, and those that are have to meet specific requirements. These include:
- Passing the means test, which analyzes your income, assets, and expenses. If you do not pass the test, you will be limited to filing for Chapter 13 bankruptcy.
- You cannot have filed for Chapter 7 in the last eight years, or Chapter 13 in the previous six years.
- You cannot have filed a petition for Chapter 7 or Chapter 13 that was voluntarily or involuntarily dismissed in the last six months.
Filing for Chapter 7 Bankruptcy
Filing a petition for Chapter 7 bankruptcy is the first and most time-consuming step of the bankruptcy process. During this time, you must list all your debts, both dischargeable and non-dischargeable, and whether you plan on reaffirming them. It is imperative that you are truthful and accurate with your figures, as false information can result in dismissal of your petition.
Once your petition, schedule, and financial affairs are scheduled with the Knoxville bankruptcy clerks, a trustee will assume the responsibility of managing your case. They request a meeting withthe creditors to whom you owe money, although it is rare for them to actually show up for the meeting.
After approval of exemptions for necessary possessions, the trustee will take control of your other assets. The trustee will review your income and expenses to determine how and when you can pay back creditors. At this point, a debtor’s only obligation is to cooperate with the trustee and give them any additional information they may need.
Because bankruptcy does not absolve you of liens placed on your home or assets, the next step is a statement of intentions. Here the debtor states what they intend to do with their secured debts. Options include returning, redeeming, and reaffirming the property that is being used to repay the debts.
Getting Your Debts Discharged
Even the fastest Chapter 7 cases are far from immediate; typically, debtors eliminate their debts four to six months after filing. Once this discharge happens, though, the debtor is free from existing financial obligations to the creditors or debt collectors.
The discharge of debt comes within a 60-day window after the initially scheduled meeting between the debtor and creditors. Barring a protest from the creditors, the court will issue the discharge a few days after the window ends. Finally, debtors must complete a class on financial education that typically lastly for a couple of hours.
Learn More About Chapter 7 Bankruptcy
Bankruptcy is part of the US Constitution. Our founding fathers wanted to allow people the opportunity to start fresh so that everyone can have the same chance at prosperity. Don’t let the stigma of bankruptcy deter you from considering it. The founders of Wal-Mart, the Walt Disney Company, Hilton Hotels, Macy’s, and more all achieved their success after filing for bankruptcy.
Schedule a meeting with Knoxville Bankruptcy Attorney learn more about your bankruptcy options. We have decades of collective experience handling cases in Knoxville, TN,and we are confident in our abilities and track record to get you the results you want. Call us at 865-276-8109 for a consultation today.