Are you considering Filing Bankruptcy Chapter 7?
We’ve gathered all your resources here so you can learn what it is, if Chapter 7 is right for you, and how to file.
Read all about chapter 7 bankruptcy below.
Filing Bankruptcy Chapter 7: What Should You Do?
In this article, you’ll learn:
- What Is Chapter 7 Bankruptcy?
- Paperwork and Legwork
- Pro Se
- Getting Back on Your Feet
- How to File Bankruptcy Chapter 7
1. What Is Chapter 7 Bankruptcy?
Chapter 7 bankruptcy is the most common type of bankruptcy.
If you file bankruptcy chapter 7, you are assigned a trustee who sells your nonexempt assets and distributes the profits to your creditors to pay for your debts.
It’s often called liquidation bankruptcy because it liquidates your assets.
Is Chapter 7 the right choice for me?
RELATED: What Type of Bankruptcy To File
In deciding which one to file for, the primary factor you should look at is the kind of debt the type of bankruptcy can eliminate. For instance, filing bankruptcy Chapter 7 cannot eliminate student loans.
There is no repayment involved in Chapter 7 bankruptcy.
However, this does not mean that you are free from all debt.
The creditor simply takes your assets with no exemption and to sell.
The profit then goes to repaying your debt.
Assets are classified as exempt or nonexempt. Creditors have the right, upon your filing bankruptcy Chapter 7, to sell your nonexempt assets.
For example, if one of your nonexempt assets is a car or property, then you must be prepared to lose them. On the other hand, exempt assets are off limits to creditors.
Although these properties will still be liquidated, chances of losing them are still small.
Not everyone can simply file a Chapter 7 bankruptcy.
First, you must have a clean track record for filing bankruptcy.
This means you should not have filed a Chapter 7 (or Chapter 13) bankruptcy before filing another one.
Any dismissed petition in the past 180 days can null your present petition.
Also, you cannot file a Chapter 7 bankruptcy until eight years after your last Chapter 7 bankruptcy discharge (if you have filed more than once).
5. Paperwork and Legwork
Filing chapter 7 bankruptcy (or any other type) also involves some legwork and a whole lot of paperwork.
You must gather all relevant documents before filing the petition in court.
Your lawyer can only help you with the actual court proceedings.
It’s up to you to secure all supporting documents needed for filing.
6. Pro Se
On the other hand, you can file bankruptcy pro se or by yourself.
The process more or less stays the same, but it will be more difficult when you go to court, although you will save a lot on legal fees.
A lot of people have been able to file bankruptcy on their own successfully.
7. Getting Back on Your Feet
Bankruptcy may seem like a monetary and legal matter at its core, but it also involves your well-being.
Before and as you file your petition for Chapter 7 bankruptcy, the court requires you to attend counselling and/or get an education on your finances.
The court wants to ensure that this never happens again.
8. How to File Bankruptcy Chapter 7
Step 1: Go to Counseling
The court requires you to go to credit counseling.
This will help you understand what bankruptcy entails. It will also provide free education on managing your money.
This counseling is also a type of assessment. The court wants to make sure you understand the process you are going through.
You must be able to present proof of attending counseling 6 months before filing bankruptcy.
3. Choose: Lawyer or Pro Se?
Do you want to do this by yourself or with a lawyer?
Filing any type of bankruptcy is more affordable if you do it yourself.
The process of filing stays the same, whether you file by yourself or with an attorney.
But if you do it with the help of a lawyer, you’re sure that someone can take care of all paperwork and matters in court.
4. Have Your Properties Assessed
The court classifies your properties as exempt or non-exempt.
Creditors sell your non-exempt properties. And they receive the profits as your form of payment.
This is the process of asset liquidation.
Assets that creditors usually liquidate include cars and jewelry.
On the other hand, exempt properties are safe from liquidation.
Even then, before you file for chapter 7 bankruptcy, make sure you’re ready to lose assets that will be up for liquidation.
5. Go to Post-Counseling
Finally, the court will ask you to attend a series of lectures on financial management.
The court and, more importantly, you don’t want bankruptcy to happen again.
Non-profit agencies provide pre- and post-counseling sessions.
If the court sees that you have completed all the steps, it will discharge you from your debt.
Check out this video by Khan Academy to learn about Chapter 7 bankruptcy liquidation:
Filing for bankruptcy is not an easy process.
Chapter 7 bankruptcy has the potential to free you of some debt.
If this gives you a chance to get back on your feet and start over again, then chapter 7 bankruptcy is a good idea.
Whatever you decide, make sure that it is with the intention of managing your finances better and making wiser financial decisions in the future.
What are your thoughts on Chapter 7 bankruptcy? Let us know in the comments section below.