September 22, 2022

Is Chapter 7 Bankruptcy Worth It?

There are a wide variety of reasons why a person may fall into a serious financial situation, and debt relief is something that can certainly ease a person’s stress related to these secured and unsecured debts. If an individual has gotten into a situation where they are unable to repay all of their debts on their own, they may turn to a bankruptcy lawyer to help them file bankruptcy.

When an individual files for bankruptcy, that person will end up working with an approved credit counseling agency, going to bankruptcy court, and figuring out a way to eliminate the debts in their life. From credit card debt to personal loans, from medical bills to business debt, and many other forms of debt, filing bankruptcy may be the exact form of debt relief you need to get back on your feet with a fresh start.

For individuals who feel as though they are drowning in debt, Chapter 7 bankruptcy is usually the route that is taken. Through the Chapter 7 bankruptcy process, you can re-establish yourself in the financial world and be able to start again. It should not be viewed as a file outcome, but rather as a plan to start over.

At Siddons Law Firm, our bankruptcy experts are here to explain how the bankruptcy discharge works, what forms of debt are not eliminated through Chapter 7 bankruptcy, and to make sure your bankruptcy filing goes smoothly.

What Is Chapter 7 Bankruptcy?

Chapter 7 bankruptcy is for individuals who have fallen on hard times and have accumulated significant debt in personal loans, credit cards, and other forms of debt. Certain forms of debt cannot be eliminated, including most student loans, child support, alimony, recent tax debts, and fines/penalties associated with criminal violations.

When you file for Chapter 7 bankruptcy, your non-exempt property will be liquidated in order to pay creditors a portion of the amount you owe them. According to the bankruptcy code, you must follow certain steps in order to complete the bankruptcy process, but it can be done within six months for many individuals.

Ultimately, a bankruptcy judge will determine if the bankruptcy filing is enough to clear you of your debts. You should be aware that Chapter 7 bankruptcy discharge can and will have a negative impact on your credit report, so it is important that you speak with an attorney who is well-versed in filing Chapter 7 bankruptcy and how to reduce its effects on your life.

Will Chapter 7 Bankruptcy Wipe Out Secured and Unsecured Debts?

Chapter 7 bankruptcy will wipe out many debts from a variety of different sources, but there are limits to its reach. As we said earlier, it cannot eliminate debts, including:

  • most student loans
  • child support
  • alimony
  • recent tax debts
  • fines and penalties associated with criminal violations

You will, however, be able to get ahead financially when it comes to the following categories of debt:

  • Medical bills
  • Credit card debt
  • Certain tax debts
  • Auto loans
  • Utility bills
  • Personal loans
  • Business debts
  • Civil judgments
  • Collection accounts
  • Past due rent

Debt collectors may try to object to being included in the discharged debts, so this is why it is essential to have an experienced and qualified bankruptcy attorney to represent your best interests and help you get your personal finances back in order.

What Is a Bankruptcy Trustee?

Once your bankruptcy petition is filed with the court, a bankruptcy trustee will then be appointed by the court. This bankruptcy trustee will manage the process, arrange a meeting between you, your lawyer, and your creditors, and ask you questions during the creditors’ meeting about your bankruptcy petition.

The trustee then figures out which of your assets can be sold to pay off the creditors, but it is important to note that most Chapter 7 bankruptcy cases are “no asset” cases, meaning there are no non-exempt assets to liquidate.

Steps to File Bankruptcy

Filing for bankruptcy entails several steps, each of which must be completed in order to obtain debt relief. You can be confident that your case will be handled professionally when you work with an experienced bankruptcy law firm like Siddons Law Firm. We will work hard to ensure that you receive the bankruptcy discharge you require to move on with your life.

Here are the basic steps to filing a Chapter 7 bankruptcy:

  1. Go to credit counseling from a qualified nonprofit credit counseling agency within 180 days before filing for bankruptcy.
  2. Hire an attorney to ensure the bankruptcy filing is done correctly.
  3. File paperwork (petition and other essential documents).
  4. Give management to a trustee.
  5. Meeting with creditors.
  6. Have eligibility determined.
  7. Liquidate nonexempt property.
  8. Figure out how to handle secured debts.
  9. Take a financial education course.
  10. Achieve final discharge where debts are forgiven.

Through these steps, you can regain control of your financial situation and move on with your life.

Is It Worth It to Go to Bankruptcy Court?

Filing bankruptcy through Chapter 7 is worthwhile for those who do not have very many assets, have debts that total more than 50% of their annual income and are able to be discharged, and would need at least 5 years to pay off debts under extreme circumstances. In those situations, Chapter 7 bankruptcy is an ideal way to achieve debt relief.

How Will Bankruptcy Affect Your Credit Report?

The primary way that Chapter 7 bankruptcy affects your credit report is that it will appear on the reports for 10 years following the closing of your case. During that time, you may find it difficult to get credit. Fortunately, your credit scores will begin to recover in the month after you file for bankruptcy in bankruptcy court.

Contact Our Bankruptcy Attorneys

If you are suffering from a mountain of debt, filing for Chapter 7 bankruptcy may be your ticket to debt relief.

Contact our experienced bankruptcy attorneys to learn more about the process and to schedule a free consultation!