Chapter 7 bankruptcy is the most common and fastest way to resolve overwhelming debt for many consumers. It provides federal protections that allow you to keep many vital assets while forgiving most unsecured debts.
Many people resist taking this action even though much or most of their financial troubles weren’t caused by negligence. Massive medical debt is cited most often, while others can’t afford to make payments after losing their job.
When does filing for Chapter 7 make sense?
Even though some debts can’t be erased, such as recent taxes and child support, Chapter 7 may be the best option when:
- You don’t own many assets
- Debts exceed more than 40% of your annual income
- Problem debts, such as credit card balances, medical bills and payday or personal loans can be discharged
- Paying off your debt would take more than five years
How do you qualify?
In order to file Chapter 7 bankruptcy:
- You must first pass a means test, which examines your expenses, income and assets
- You cannot file if you have already completed a Chapter 7 in the past eight years, or a Chapter 13 bankruptcy in the past six years
- You cannot file if a prior bankruptcy petition was dismissed within the previous 180 days because you didn’t show up in court, failed to comply with court orders, or voluntarily withdrew a filing after creditors asked for relief to recover property for which they have a lien
How do you file for Chapter 7?
Filing for bankruptcy is not a do-it-yourself procedure. An experienced bankruptcy attorney here in Missouri can help you file the paperwork and guide you through the entire process. Once you file a petition, a court-appointed trustee will manage your case.
If you qualify, the process typically takes three to six months. While Chapter 7 can affect your credit for up to 10 years, many filers see their credit start to improve within a few months. Your lawyer can help you overcome any worries and misconceptions to help you achieve a fresh start.