When Chapter 7 is the Best Option

When we hear the word “bankruptcy,” we generally don’t think positive thoughts. After all, bankruptcy is often Chapter 7 bankruptcy lawyer in New Haven, CTviewed as a last resort. It is ultimately an admission that a person cannot pay debts to his/her creditors. At the same time, for some people, filing for bankruptcy can provide incredible relief once their debts have been cleared.

Chapter 7. Chapter 7 of the federal bankruptcy code applies mostly to people with little or no disposable income. Sometimes called “liquidation bankruptcy,” this means that some of their assets can be sold off to pay their creditors.

 When does filing Chapter 7 make sense?

  •  You don’t have many assets, and your bad debts (like medical bills, credit card debt and personal loans) total more than 50 percent of your income.
  • You’re the target of daily calls from creditors.
  • You’ve recently lost your job, and the loss of income makes it nearly impossible to find a way to pay your debts within five years.
  • You’re aware that not all your debt will disappear. You’ll still be required to pay back student loans, child support and tax debt.

 How do you file for Chapter 7 protection?

  •  Find an experienced attorney. This is NOT a do-it-yourself project. If you fail to complete or misstate information on bankruptcy paperwork, your case can be thrown out of court.
  • Get credit counseling. You must complete counseling from a qualified credit counseling agency within 180 days BEFORE filing for Chapter 7. You cannot qualify without the counseling.
  • File paperwork. Your attorney can help you compile all the documents, but you will be required to collect the relevant documentation. Once filed, an “automatic stay” goes into effect, prohibiting creditors from suing you or contacting you.
  • Meet with creditors. You, your court-appointed trustee and attorney will meet with your creditors and answer questions about your finances to determine your eligibility.
  • Selling Assets. The trustee will determine whether any of your “non-exempt” assets (like jewelry, cars, equity in your home, etc.) should be sold to pay off your creditors.
  • Discharge. About 3-6 months after filing your petition, your case could be discharged, and your eligible debts forgiven.

Be forewarned. Filing for bankruptcy can seriously harm your credit scores and can adversely impact your ability to purchase a new home, get new credit cards or get a new job for years to come. Still, for many who are in dire financial straits, Chapter 7 can provide a pathway to a fresh financial start.

There are many options to consider, as an attorney, like a Chapter 7 bankruptcy lawyer in New Haven, CT, at a firm such as The Law Offices of Ronald I. Chorches, can explain.