If you’re considering filing for bankruptcy, you may be overwhelmed with the number of different types of bankruptcy that are available to you. Chapter 7 is the most common type of bankruptcy for people of low to middle income, but it is far from the only possibility if you’re considering filing for bankruptcy.
Chapter 7 bankruptcy, also known as liquidation or straight bankruptcy, allows people to get rid of most of their debts all at once. It’s harder to qualify for Chapter 7 since the laws changed in 2005, but the most important thing to know about Chapter 7 is that it’s the process that eliminates all debts at once. Most of the other types of bankruptcy lead to a restructuring of debt. That being said, there are some types of debt that cannot be eliminated under a Chapter 7 bankruptcy.
If you are considering bankruptcy, talk to a bankruptcy attorney you can trust. It’s important for you to understand your options and get a professional evaluation of your situation before undergoing this process.
What is Chapter 7 Bankruptcy?
In a Chapter 7 bankruptcy, all of your assets and property are gathered and sold off to pay off as much of your debt as possible. There are certain exemptions you can make for property and assets, meaning you can usually keep things like your house, your car, and other property within limits. Federal and state laws vary on exemptions, meaning you can choose which type of exemption you want to take. For bankruptcies in Kentucky it’s usually more favorable to go with the federal exemptions.
Once your property (excluding exemptions) is taken and sold, your debt will be liquidated and that will be the end of it. Chapter 7 bankruptcy usually means a drop in your credit score, but a good bankruptcy attorney will be able to help you out with strategies to rebuild credit in the aftermath of filing.
The main requirement for qualifying for Chapter 7 bankruptcy is the “means test.” Simply put, if you have the means to pay your debt on a different timeline, the court will probably convert the case to a Chapter 13 bankruptcy. There are two major exceptions to this rule: Disabled veterans who are trying to eliminate debt incurred while on active duty and filers who incurred their debt primarily while operating a business can generally qualify for Chapter 7.
Other Types of Bankruptcy
If you don’t qualify for Chapter 7 bankruptcy, your bankruptcy will probably be converted to Chapter 13. This allows you to set up a repayment plan that will allow you to repay your debt over the course of three to five years. Generally, you will have to file a Chapter 13 bankruptcy if you have sufficient means to cover the debt in question.
When Should You Talk to a Bankruptcy Attorney?
If you’re considering any type of bankruptcy, talk to a bankruptcy attorney at Bunch & Brock as soon as possible. Our experienced attorneys will help you to get the maximum exemptions allowed under the law and be able to offer guidance when it comes to rebuilding your credit in the aftermath of a bankruptcy. You may think you can’t afford an attorney in your position. It’s more likely that a good bankruptcy attorney will leave you in a much better financial position than you would have been if you tried to go it alone. Get in touch with us as soon as you can.
