If you are going through financial difficulties, you may be wondering which of many possible roads you should take. There can be a great deal of confusion in regard to what is the best way to tackle debt. The solution can be different depending on the particular situation you have found yourself in, and this is why it is important that you conduct thorough research on different options.
Chapter 7 bankruptcy is a specific type of bankruptcy that has been created for those who have debts that total more than 40 percent of their income. It is ideal for people in situations where they do not have a high amount of assets that they can leverage to help pay off the debt.
Why can Chapter 7 bankruptcy be beneficial?
Chapter 7 is usually an ideal option for a debtor who would not be able to pay off their debt within a five-year period, even if they were extremely frugal with their money. Chapter 7 bankruptcy can be beneficial because it can lead to certain debts, such as payday loans, medical bills and credit card debts, being written off completely.
If debts are so easily forgiven in a Chapter 7 bankruptcy, why doesn’t every debtor file?
Only certain debtors in particularly difficult circumstances are eligible to file for Chapter 7 bankruptcy. You must be able to pass the means test, which will look at both your income and your outgoings, as well as any property that you own so that your financial situation can be evaluated. If you pass the means test, you will only be eligible to file for Chapter 7 bankruptcy if you have not gone through a Chapter 13 bankruptcy in the last six years and if you have not gone through a Chapter 7 bankruptcy in the last eight years.
What is the first step that I should take if I want to file for Chapter 7 bankruptcy?
If you want to file for Chapter 7 bankruptcy, you will first need to go through credit counseling from a non-profit agency. This will help you prepare for the process. It is a good idea to look at all of your debt-resolving options before taking action.