If you are struggling to pay outstanding medical, credit card or other bills, you may feel powerless over your financial situation. Still, there are a few debt-relief options that may allow you to regain control. Chapter 7 bankruptcy is one of these.
With Chapter 7 bankruptcy, you sell some of your assets to pay off your creditors. After you liquidate, the bankruptcy court discharges many of your remaining debts.
Do you have to qualify for Chapter 7 bankruptcy protection?
To be eligible for Chapter 7 bankruptcy protection, your income must be below a certain threshold. To qualify, you may need to pass a financial means test. Otherwise, if you make enough to repay your creditors over time, you may have to opt for Chapter 13 bankruptcy.
Does Chapter 7 bankruptcy do away with all your debts?
While your Chapter 7 bankruptcy filing is likely to wipe out many of your debts, it does not do away with everything. The following types of debt typically are not dischargeable with Chapter 7 bankruptcy:
- Student loans, although there are exceptions
- Spousal support
- Child support
- Criminal restitution, fines and penalties
Are you going to lose everything?
While discharging the debts you cannot pay is appealing, you may worry about losing everything. Fortunately, there are many exemptions in the bankruptcy code. If your assets fit into one or more of these exemption categories, you can probably keep them.
Ultimately, even though there is a great deal of misinformation about Chapter 7 bankruptcy floating around, you should not let myths or half-truths keep you from getting your financial affairs in order.