When you have more debt than you can manage and repay efficiently, bankruptcy could be an option. For the unversed, bankruptcy is a form of debt relief, which can wipe a considerable number of unpaid bills and debts. The most common and fastest form of bankruptcy is Chapter 7. It is important to know that bankruptcy is a huge financial decision, and things can depend on one’s unique financial situation. Check with a bankruptcy attorney in Hagerstown, MD, to know if you have other options to minimize your financial distress. In this post, we are sharing basic details about Chapter 7 bankruptcy.
Chapter 7 vs Chapter 13
You may have heard of both these options. Chapter 7 bankruptcy is the ideal option for people who don’t want a repayment plan. The process will involve liquidating your assets so that your creditors can be paid. If you file for Chapter 13 bankruptcy, you will have a repayment plan, which will allow you to retain some of your assets. In case of Chapter 7 bankruptcy, you may retain your house and car, provided you can pay the instalments. When a person has a stable income and is sure of repaying their creditors, Chapter 13 bankruptcy may work better.
Who can file for Chapter 7 bankruptcy?
Your attorney can explain if you qualify for Chapter 7 bankruptcy, which is dependent on your income. Your income must be lower than the state median to choose this option. The attorney can do a quick means test to check your expenses, assets, and debts. You cannot file for Chapter 7 bankruptcy if you have done so within the last eight years.
Things to understand
Bankruptcy is a huge financial decision, no matter what option you choose. Chapter 7 bankruptcy will appear on your credit report for the next ten years, which may make it very hard to get a mortgage or unsecured loan. If you get a loan from private lenders, you will have to premium interest rates. Even with these consequences, Chapter 7 bankruptcy may be a good way to get rid of debts you can never repay. Also, the moment you file for bankruptcy, your creditors cannot harass you further for payments.
If you don’t have too many assets and your debts are more than 50% of your income, you may get relief with Chapter 7 bankruptcy. Consult an attorney before you make the final decision.