Questions and Answers about Chapter 7 Bankruptcy
One day in the future because of poor decisions or circumstances beyond your control, you may be forced to file for bankruptcy protection. Filing for chapter 7 bankruptcy may sound appealing to you in the sense that all your debts will be wiped clean and creditors will stop harassing you, but the implications and ramifications of filing for bankruptcy should not be taken lightly. Bankruptcy should be your last resort, however if you do need to file for chapter 7 protection, you need to familiarize yourself with the intricate details of bankruptcy and be prepared to accept all the consequences. The following are the answers to some questions you may have about chapter 7 bankruptcy.
1. What is chapter 7 bankruptcy?
Under the United States Bankruptcy Code, individuals can file for chapter 7 or chapter 13 bankruptcy protection. Chapter 7 bankruptcy is total bankruptcy and liquidation of all your non-exempt assets in order to pay off your creditors. After your assets have been sold off, your remaining debt will be discharged, giving you a fresh start.
2. What kind of items are exempt from liquidation of my assets?
The list of assets that are exempt from liquidation vary from state to state. There are federal guidelines, but each state is free to determine its own exemptions for chapter 7 bankruptcy. Exempt assets can include certain day to day necessities within certain limits. For example, they can include vehicles that are necessary to drive to work, clothing, household goods, furnishing, jewelry like wedding rings, pensions, a portion of home equity, and damages awarded from personal injury law suits. In order to get the full list for your state, you can contact a bankruptcy attorney or the federal court that handles bankruptcies in your area.
3. How long will a chapter 7 bankruptcy filing show on my credit report?
These days, almost everything requires a credit report. Credit cards, loans, job applications, apartment rental, phone and cable services, and many other services require credit checks. Having a bankruptcy on your credit report is the most damaging factor to your credit score that you can have on your credit report. A chapter 7 bankruptcy filing will show on your credit report for ten years.
4. Will filing for bankruptcy erase all of my debts and financial obligations?
No. When you file for chapter 7 bankruptcy, you will be asked to list all of the debts you owe and all of your creditors. If you fail to write down a creditor or debt, it will not be part of the bankruptcy order. Also, bankruptcy will only protect against debts accrued before the filing date. In addition to this, certain debts can almost never be discharged by bankruptcy. The most common debts that cannot be erased are federal income taxes, federal loans, lawsuits and judgments against you, alimony, and child support.
5. Will filing for chapter 7 stop creditors from garnishing my pay checks?
It depends. Chapter 7 bankruptcy protects a debtor from wage garnishment unless it is the result of child support.
6. Am I eligible for chapter 7 bankruptcy protection?
To determine eligibility for chapter 7 bankruptcy, you must pass the means test. The means test is a way to screen out people trying to abuse the protection of chapter 7 bankruptcy. In order to be eligible for chapter 7 bankruptcy, your monthly income must be below the median income in your area.
