Filing for bankruptcy is a major decision that can considerably help a trustee’s financial hardships. Despite the benefits that Chapter 7 bankruptcy offers, people who are unaware of how the bankruptcy option works often avoid this as a consideration entirely. Last year, more than 350,000 people decided to let Chapter 7 bankruptcy help them with their debt. Knowing how this financial decision works can help you come to an informed decision, so what should you know about the process?
What you can expect from Chapter 7 bankruptcy
Many people have the impression that they have to sell everything they own to discharge their debt. In reality, this form of bankruptcy only requires a trustee to sell any non-essential assets, such as a second home or car, heirlooms, collectibles or other valuables.
Before a trustee can earn approval for bankruptcy, they must first qualify for it. An individual, partnership, or other business entity that meets the requirements from a “means test” is eligible for Chapter 7 bankruptcy. A “means test” looks at the last five years of an applicant’s income, debts, and spending to determine if the trustee is abusing the system with their bankruptcy filing.
A trustee will need to file their application with the court and provide documents that prove necessary factors like your current income and debts and any leases or loans you may have.
Once the court approves your application, they will put an “automatic stay” into effect that will prohibit creditors from harassing you over any old debts.
From there, after your creditors meeting to confirm details about your application, you will need to proceed with selling non-essential property. Once you have completed the application process, bankruptcy will discharge your unsecured debts, like medical debt, credit card debt, and unpaid utility bills.
See how bankruptcy can help you
If significant financial hardships keep you from living the life you want or deserve, talk to a bankruptcy attorney to see how Chapter 7 bankruptcy can free you from financial struggles. The sooner you reach out to a lawyer, the sooner they can help answer your questions and see you through the application process.