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Chapter 7 Bankruptcy: What is It Is and how to file

 

 

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Chapter 7 Bankruptcy: What is it is and How to File

 

Chapter 7 can wipe out overwhelming debt, with notable exceptions such as student loans.

 

by Sean Pyles Senior Writer | Personal finances, financial debt Sean Pyles leads podcasting at NerdWallet as the host and producer of NerdWallet's "Smart Money" podcast. On "Smart Money" Sean talks with Nerds from NerdWallet's NerdWallet Content team to answer questions from listeners regarding their personal finances. With a particular focus on sensible and actionable money advice, Sean provides real-world guidance that can help consumers better in their finances. Beyond answering listeners' money questions on "Smart Money," Sean also interviews guests outside of NerdWallet and also creates special segments that explore subjects such as the racial gap in wealth, how to start investing, and the history of student loans.

 

Before Sean lead podcasting for NerdWallet, he covered topics concerning consumer debt. His writing has been featured in USA Today, The New York Times and elsewhere. When he's not writing about personal finances, Sean can be found playing in his garden, going on runs , and taking his dog for long walks. He is based at Ocean Shores, Washington.

 

 

 

 

 

 

Updated on Aug 6, 2021 3:31PM PDT

 

 

 

Written by Hanah Cho. Cho is Vice President Personal financial Hanah Cho, Vice President for Content. She managed multiple NerdWallet teams that focused on personal finances before becoming deputy director and then director. She was hired by NerdWallet as a journalist, covering small business. Prior to that, she wrote about business and startups at The Dallas Morning News, and previously was a business writer for The Baltimore Sun. She also was treasurer of the Texas Chapter of the Asian American Journalists Association.

 

 

 

 

 

 

 

 

 

 

 

The majority or all of the products featured here come from our partners, who pay us. This impacts the types of products we write about as well as the place and way the product is featured on the page. However, it does not affect our opinions. Our opinions are our own. Here's a list and .

 

 

 

 

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Chapter 7 bankruptcy can wipe off a variety of forms of debt that are overwhelming with the help of a federal court. It is possible to give up some assets, such as a costly vehicle or jewelry, however, most people who file bankruptcy do not. Chapter 7 bankruptcy is the fastest and most common form of bankruptcy.

 

Chapter 7 bankruptcy erases most unsecured debts, that is, debts without collateral such as medical bills, credit card debt and personal loans. However, certain types of debt, including back taxes, court judgments, alimony and child support, and student loans generally aren't eligible. Chapter 7 bankruptcy will leave a serious impact on your credit reports for 10 years. During this time you'll likely have a harder time obtaining credit. But, you'll notice your credit scores begin to rise in the following months after you make an application.

 

Read on to learn about how you can get a Chapter 7 bankruptcy, how to file, whether this option of debt relief is suitable for you, and the best way to get back on track following bankruptcy.

 

Do you qualify to file Chapter 7 bankruptcy?

 

 

 

To qualify for Chapter 7 bankruptcy you:

 

Must pass the , which examines your earnings as well as assets and expenditures.

 

Could not complete the Chapter 7 in the or in the last six years.

 

Do not have to have filed bankruptcy papers (Chapter 7 or 13) within the preceding 180 days. The petition was dismissed because you failed to appear in court or adhere to order of the courts, or you decided to dismiss your own petition due to creditors seeking court relief to reclaim the property they held a lien on.

 

 

How do you do you file Chapter 7 bankruptcy?

 

 

 

You can probably complete the process in just six months. You'll need to follow a few steps.

 

You must attend pre-filing bankruptcy counseling from a qualified non-profit credit counseling service within 180 days prior to filing.

 

Before you start tackling the many forms required to fill out the forms required to file Chapter 7, find a certified bankruptcy attorney who can assist. It can be difficult to determine if you need debt relief however, this isn't an easy task to tackle on your own. A mistake in the paperwork or a mishap can result in the case being dismissed or not having some debts eliminated.

 

Filing paperwork: Your attorney will help in filing your petition and other paperwork. However, it is your responsibility to collect all the relevant evidence of your assets, income, and debts. Automatic stays take effect from this point on which means that creditors can't pursue you, garnish your wages or call you to demand payment.

 

Trustee assumes the responsibility: After the petition has been filed, a court-appointed bankruptcy trustee will begin managing the process.

 

Meeting of creditors The trustee will set up an appointment with you, your lawyer and your creditors. You'll need to respond to any questions brought up by the trustee and creditors regarding your bankruptcy form and your financials.

 

The eligibility criteria is determined: After reviewing your documents, the trustee will confirm your eligibility for Chapter 7.

 

Non-exempt property is handled: The trustee decides if assets that aren't exempted are worth selling, so that the proceeds can be given to creditors. It could be jewelry, or even the equity in your home or car if it's higher than the exemption limit set by your state. The majority of individual Chapter 7 cases, however they're "no asset" instances where there's none of the nonexempt property to liquidate.

 

Secured debts: To resolve your secured debts, the property that is used as collateral could be ordered return to your creditor. Or you may be able to either redeem the collateral (you pay the debtor what you think it's worth) or reaffirm the debt (arrange to exclude the debt from bankruptcy and continue to make payments).

 

Education course: Before your case is dismissed, you'll have to take an education in finance with a certified non-profit credit counseling agency.

 

Discharge 3 to 6 months after submitting your petition your case is discharged, which means that eligible debts are forgiven. Shortly thereafter you will have your matter closed.

 

 

Is Chapter 7 bankruptcy right for you?

 

 

 

Be sure to know the distinction between Chapter 7 and Chapter 7. It is logical when:

 

There aren't many assets for you.

 

Your problem debts total more than 50 percent of your income.

 

Your debts that are causing you problems could be wiped out, or forgiven, by Chapter 7. This can include things like medical bills as well as credit card debt. personal and payday loans.

 

It would take five years or more to be able to pay off your debt even if you take extreme measures.

 

 

Certain types of debt aren't removed in bankruptcy, like recent taxes as well as child support and student loans. However, bankruptcy may still be an option for you however, if eliminating other types of debt could allow you to pay for the debts which can't be erased.

 

The second most common type of consumer bankruptcy, Chapter 13, may be a better option if you own more assets or secured debts, and you can pay back a portion or all the debt you owe.

 

are available, too, such as the debt management program offered by an agency. Benefit from the free initial advice that counsellors in the field and many bankruptcy lawyers can provide before making a decision on a course of action.

 

Rebuilding after bankruptcy

 

 

 

Your financial life -- and particularly your credit -- will need some attention after , but having many accounts settled is an excellent start.

 

Do two things to :

 

Make a financial plan Create your budget, set financial goals, and think about using the free assistance of a credit counselor from a non-profit organization to assist you on your route.

 

Rebuild your credit score Pay all your bills in time, and keep your balances on credit low, and .

 

 

Commonly asked questions Will bankruptcy affect my credit score?

 

 

 

If you're about to file for bankruptcy, your credit reports may have some dents due to late payments or discharged accounts. After bankruptcy, however, your credit scores are expected to improve within six months.

 

 

 

 

 

 

 

 

What about filing for bankruptcy myself?

 

 

 

It is recommended to hire an attorney before filing for bankruptcy. There are numerous moving parts, and one small error in a clerical record could cause your case to be dismissed.

 

 

 

 

 

 

 

 

How long does it take to file bankruptcy?

 

 

 

There are many steps when filing for bankruptcy however with the assistance of a competent bankruptcy lawyer you can finish the process within six months.

 

 

 

 

 

 

 

 

 

 

Do bankruptcy filings ruin my credit?

 

When you're ready to file bankruptcy, your credit files may have a few scratches from late payments or discharged accounts. Following a bankruptcy discharge however, your credit scores are expected to improve within six months.

 

 

 

What is the best way to file bankruptcy myself?

 

You should hire an attorney when you are filing for bankruptcy. It is because bankruptcy has numerous moving parts, and one tiny clerical mistake could cause your case to be dismissed.

 

 

 

How long will the process take for filing for bankruptcy?

 

There are a variety of steps to take in filing bankruptcy however with the assistance of a certified bankruptcy lawyer you can complete the process in six months.

 

 

 

 

 

 

 

 

 

The author's bio: Sean Pyles is the executive producer and host of NerdWallet's Smart Money podcast. His work has been published on The New York Times, USA Today and elsewhere.

 

 

 

 

 

 

 

 

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