A Quick Guide to Chapter 7 Bankruptcy
If you’re thinking about filing for personal bankruptcy, you’ll find that there are two types of bankruptcy cases to chose from: Chapter 7 bankruptcy and Chapter 13 bankruptcy. Both types are reserved for individuals who are struggling with their finances and need help getting back on solid ground, but both types proceed in different ways. You’ll likely find that one type of personal bankruptcy is much better for your situation than the other, but it is still a good idea to talk with a bankruptcy attorney to familiarize yourself with both types.
Until then, here’s a quick overview of Chapter 7 bankruptcy, which tends to be the more common case for personal bankruptcies:
- Chapter 7 bankruptcy uses a process of liquidation to resolve outstanding debts. This means that the court will work with you to pay off as much of your debt as possible, and the remaining debts that cannot be paid off will be dismissed.
- It’s important to note that in Chapter 7 bankruptcy, just as in Chapter 13, there are certain types of debt that cannot be liquidated. These debts include income taxes, alimony, and child support (just to name a few). These must be paid off normally.
- Although Chapter 7 liquidation may sound like the best option and a quick fix to your financial woes, it’s important to understand that there are consequences. Liquidation of your debts means that the court may be able to give some of your personal assets to creditors in order to pay off as much of your debt as possible.
- Chapter 7 bankruptcy does require a filing fee: you’ll have to pay at least $335 to file one of these cases.
- The entire processes of filing for bankruptcy under Chapter 7 are typically pretty short. You may find that it only takes a few months for everything to be processed. Nevertheless, the effects of filing for bankruptcy can remain on your credit report for up to 10 years. Although filing for bankruptcy can be a great opportunity to start fresh, it’s not a decision you want to take lightly.
If you’re having trouble getting your finances organized, just remember that you aren’t alone. Around 97% of all bankruptcies in the U.S. are personal bankruptcies, and data from U.S. bankruptcy court statistics show that around 1.5 million Americans file for bankruptcy each year.