If you’ve started to consider your bankruptcy options then you might initially be hoping for a Chapter 7 bankruptcy. After all, you already know most of your debts get discharged entirely at the end of a Chapter 7 case, whereas a Chapter 13 case will require you to make some payments.
But if getting all your debts wiped out were simple, Chapter 13 wouldn’t exist. Neither would bankruptcy lawyers. Since both do, it’s a good idea to understand why Chapter 7 isn’t as “open and shut” as some people imagine.
Before racing to a Chapter 7 case you need to understand what a Chapter 7 case is, and compare the realities of the case to your bankruptcy goals.
In a Chapter 7 bankruptcy your assets are sold off to pay your debts. The only time it’s really advantageous is if you don’t have any assets to speak of.
That doesn’t mean you can’t own anything. You might have a small car worth only about $1500. That car would be protected by certain bankruptcy exemptions.
It does mean Chapter 7 may not be the best form of bankruptcy to file if you are attempting to save your house from foreclosure.
Once you’ve worked with your lawyer to determine whether the property you’re worried about protecting is exempt, you must then pass the means test. Chapter 7 isn’t meant for everyone. It’s designed for people with a lower income.
Granted, “lower income” is pretty generous. You can pass the means test on a middle class income, for example. But like most things involving money and the US government, it’s not as straightforward as it looks on the surface.
Fortunately, bankruptcy attorneys can quickly look over your financial situation to determine if you meet the standard.
See also: How to File Chapter 7 With No Money.
Every person who files bankruptcy is required to go through credit counseling. This shouldn’t be confused with “consumer credit counseling” services. We’re talking about a class you’ll have to take.
You’ll cover how credit works, how to budget, and a bunch of other financial topics. Unfortunately there’s no way to test out of it or to avoid it, even if you’re filing bankruptcy because of medical emergencies, disabilities, or other unforeseen circumstances which have nothing to do with your ability to manage money.
Fortunately, you can meet the requirement by taking an accredited course online or over the phone, and it only takes you about an hour to get your certificate. The certificate is one of the documents which must be included in your bankruptcy paperwork.
You’ll have to put together an entire packet of information when you file for bankruptcy. We will help you do this, but be prepared to take a deep (accurate) dive into your finances.
The list of forms and schedules is long. If you’re not a lawyer it’s not even easy to determine which forms you need to file.
To do your part, you need to gather all your bank statements, your paystubs, and copies of every bill you owe. You also need to get a copy of your credit report, as well as your regular, monthly bills and expenses. If you need additional documentation we’ll advise you of that after getting a closer look at your unique situation. This is generally something we’d do during your free consultation.
Easy, but not simple.
If you’re working with an attorney it’s not hard to file for Chapter 7 bankruptcy at all. But Chapter 7 bankruptcy is never simple. It’s a complex legal matter. So don’t make the mistake of trying to handle the case on your own.
Make sure you’ve got a qualified, experienced bankruptcy attorney on your side, someone who can walk you through the entire process. You’ll give yourself your best shot at a successful case, and you’ll sleep better knowing you’re in good hands.