Many people do not turn to bankruptcy until they have no other options left on the table for their debt. If you decide to turn to Chapter 7 bankruptcy, you may want to find out the effects it will have on your finances before using it. Will it offer the fresh start you need? The answer depends on your current situation. Here is some information to help you know if Chapter 7 will give you the fresh start that you really need.
Make Sure You Qualify
Before you can answer this question, you will need to find out if you qualify for it. Many people might be eligible to use it, but some are not. The main thing that matters is your income. If you earn a lower income than the average person in your state, you will likely qualify for it. While this is the main factor that matters, your bankruptcy attorney will also look closely at your debts. While your debts might not disqualify you from using Chapter 7, they might make Chapter 7 the wrong option.
The Debts You Have
Bankruptcy lawyers generally like to separate a person's debts into two categories. The first category is qualifying debts. Qualifying debts refer to the balances you owe to creditors that the bankruptcy court will discharge if you file for Chapter 7. Credit card balances fall into this category, but other debts also do. For example, if you owe medical bills, personal loans, and have a balance for a repossessed car, these will all fall into the qualifying debt category.
The other category is priority debts, which are debts that will not receive a discharge if you file. Some examples of these debts include student loans, child support, and IRS tax debts. If you file for bankruptcy, you will not receive a discharge on these debts.
Your House Status
The other thing that your lawyer might examine is your house status. If you own a house, where do you stand in terms of your payments and equity? If you have too much equity in the house, the court might require that you sell the home. If you are behind on your payments, Chapter 7 does not offer a way to catch up.
These are some of the main factors that Chapter 7 bankruptcy attorneys examine. After examining these things, your lawyer can help you determine if filing for Chapter 7 will offer the fresh start you need.
Contact a Chapter 7 bankruptcy lawyer for more information.