3 Key Principles of Chapter 7 Bankruptcy
Posted on: 18 March 2020
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Are you tired of living with so much debt that you are never sure how you will pay your upcoming bills? If so, one solution you could consider is Chapter 7 bankruptcy. While not everyone who is in debt may benefit from it, many people can. To understand this branch more clearly, here are three principles of it.
1. It Is Intended for People Who Do Not Earn Large Incomes
The first principle is that Chapter 7 is intended for people who do not earn a lot of money. People who make too much income will not qualify for this branch, and lawyers perform tests to find out if someone qualifies or not.
The standard test that lawyers use is the means test. If you want to know if you qualify based on your income, this test will tell you if you do or not. If you earn too much, you may want to evaluate other forms of debt relief solutions. Chapter 13 bankruptcy, for example, might be right for you.
2. It Does Not Require Repayment but Has Limits on Qualifying Debts
The second principle is that this branch does not require repayment of debts, but it has limits on the types of debts that qualify for forgiveness. The discharge you receive in a Chapter 7 case eliminates debts as though you never had them. This discharge is a primary reason people prefer this branch over other debt solutions.
The downside is that it will not provide you with a discharge for every debt on your books. If you have debts that are not qualifying, you will owe them in full after you file your case. Child support is an excellent example of a debt that will not qualify for forgiveness.
3. It Requires Careful Analysis of Assets and May Require Giving Them Up
The third principle of Chapter 7 relates to the assets you own. With Chapter 7, there are trade-offs. The primary one is that you risk losing assets in exchange for the forgiveness of debts. If you have cash, for example, the bankruptcy court can ask for it. They can also ask for other assets, such as vehicles, jewelry, and recreational assets.
Chapter 7 is a beneficial branch of bankruptcy for people who qualify and have certain types of debts. If you believe that filing this type of bankruptcy could help you, talk to a Chapter 7 bankruptcy lawyer in your area.