Chapter 7 bankruptcy: What you need to know before filing it
Chapter 7 bankruptcy helps you to repay your multiple debts by selling your valuable assets, under the supervision of the bankruptcy court. It can help you when you’ve failed in all your attempts to repay your existing debts.
Eligibility criteria for filing Chapter 7
You need to satisfy certain factors in order to qualify for Chapter 7 bankruptcy; go through the following lines to know who can qualify and who cannot.
Apart from being a resident of USA, you can file Chapter 7 if you satisfy the following factors.
• Enough income: You should have enough income to repay your existing debts.
• Means test: You should qualify means test to file Chapter 7. Your income need to be less than the State Median Income of your family size.
• Property or business: You should have a property or a business in USA.
• Previous bankruptcy filing: You’ve not filed Chapter 13 within 6 years and Chapter 7 within 8 years of time.
• Credit counseling session: You have received credit counseling from an approved counseling agency within 180 days prior to filing Chapter 7. However, there are certain exceptions in case of emergency situations.
However, you’ll not be able to get discharge from your outstanding debts by filing Chapter 7 bankruptcy if:
• You’re not honest about your financial condition or your business transactions. • You try to hide, destroy or transfer your properties so as to cheat your creditors or a court trustee, who has been assigned by bankruptcy court. • Your previous bankruptcy filing was dismissed within past 180 days because you’ve violated a court order.
Pros and cons of filing Chapter 7
The pros and cons of filing Chapter 7 Bankruptcy are discussed in the following lines.
Pros:
• You can get discharge within 4 months of filing Chapter 7.
• You’ll be able to obtain new lines of credit.
• You can keep your salary and the property that you’ve bought after filing Chapter 7.
• You can retain certain assets that are exempted under Chapter 7.
• You’ll be able to stop legal actions against you, such as foreclosure or wage garnishment.
Cons:
• Negatively affects your credit record and stays in your report for 10 years.
• You’ll lose your non-exempt property and your luxury possessions.
• You cannot file another Chapter 7 for 8 years and Chapter 13 for 6 years. The time is calculated from the date you filed your last bankruptcy.
• It affects your ability to get suitable credit or buy a home.
• You’ll face problems to secure a good job.
• It doesn’t remove lien from your property.
However, as per bankruptcy laws, if you file Chapter 7, then your employers cannot sack you from the job. Your creditors also cannot put you in jail in you file bankruptcy under Chapter 7.