Nearly 4 out of 5 Americans live paycheck to paycheck, which means even a small unanticipated expense or a single week of missed work is enough to threaten most families’ financial security. If circumstances beyond your control have left you in an overwhelming amount of debt, filing for chapter 7 bankruptcy could provide a much-needed fresh start.
Here are the answers to some of the most frequently asked questions about Chapter 7 bankruptcy:
1. Am I Eligible for a Chapter 7 Discharge?
Chapter 7 bankruptcy was designed to help people with little to no disposal income. As such, it’s usually only available to debtors who earn less than their state’s median income for a household of their size. If your earnings exceed this income level, you may still qualify, but you would have to pass a means test first.
Having a qualifying income or passing a means test isn’t the only eligibility requirement. If one of the following applies to you, it might not be possible to secure a chapter 7 discharge:
- You were granted a chapter 7 discharge within the past eight years; or
- You were granted a chapter 13 discharge within the past six years (unless you’ve since paid off at least 70 percent of applicable unsecured debts).
You can confirm your eligibility by consulting a bankruptcy attorney before filing the initial petition.
2. Can Chapter 7 Eliminate All My Debt?
Chapter 7 bankruptcy can discharge many kinds of debt including:
- Credit card balances;
- Medical bills;
- Collection agency accounts;
- Past due utility bills; and
- Past due rent.
Unfortunately, there are certain kinds of debt that chapter 7 bankruptcy cannot discharge. Examples include:
- Past due child support;
- Past due alimony;
- Student loans;
- Certain criminal fines, fees, and penalties;
- Tax debts from the prior three filing years;
- Debts obtained by fraudulent means; and
- Debts incurred by causing bodily injury or death while operating a motor vehicle under the influence.
3. How Does Chapter 7 Differ from Chapter 13?
While chapter 7 bankruptcy liquidates non-exempt assets to pay back creditors, chapter 13 requires petitioners to implement a three- to five-year repayment plan. As such, chapter 13 is often a valid alternative for those who don’t qualify for chapter 7 because they earn too much money.
4. How Long Does It Take to Complete Chapter 7 Proceedings?
Chapter 7 proceedings can be completed within a matter of months. The general steps for obtaining a discharge are as follows:
- Gather essential documents;
- Complete credit counseling;
- Fill out the petition;
- File the petition in court;
- Attend the meeting of creditors; and
- Surrender any nonexempt assets to the trustee.
Assuming there are no issues or complications, you will receive a notice from the court that your debts have been discharged a short while after the liquidation has been completed.
Speak with a Jackson Bankruptcy Attorney Today
To find out if you may be eligible for chapter 7 bankruptcy, contact Brown Bass & Jeter, PLLC. Our attorneys have 40 combined years of experience in legal practice. Call 601-487-8448 or fill out our Contact Form to schedule a consultation with a bankruptcy lawyer in Jackson.