Choosing between Chapter 7 and Chapter 13 is not always a simple choice as both offer benefits. If you discover that you qualify for Chapter 7 and decide to use it, you might want to learn some things about it before filing. Here are four essential facts to know about Chapter 7 bankruptcy if you are considering filing.

1. You Must Pass the Test to Use It

One vital thing to know about Chapter 7 bankruptcy is that people can only use it if they pass a test. A bankruptcy attorney can complete this test for you to determine if you qualify. To complete the test, you will need a list of all your income from the last six months. You must include your earnings from work and extra windfalls of cash you received during this time. After adding it up, where does the total amount stand compared to the average income where you live? If you earned less than the stated amount, you qualify. If you earn more, you are not eligible for Chapter 7.

2. The Court Issues an Order to Stop Your Creditors from Contacting You

The second fact to know is that the court issues an order to stop your creditors from contacting you. The court issues this after you file your Chapter 7 case, and the order is called an automatic stay. This order provides relief from creditor harassment. If you normally get phone calls every day from your creditors, your phone should stop ringing once the court makes this order.

3. The Trustee Can Take Non-Exempt Property to Sell It

The next thing to know is that you risk losing some property. If you have any non-exempt property, the court can take it from you. Your lawyer can explain whether your property falls into the exempt category or the non-exempt category. You can lose non-exempt property, but only if the court decides to take it.

4. You Receive a Discharge Only on Qualifying Debts

The final thing to know is that the court forgives your qualifying debts through Chapter 7. Debt forgiveness means that the court wipes out your debts, leaving you with zero balances. Afterward, your creditors cannot try to collect these debts as they will no longer exist.

You can learn more about Chapter 7 bankruptcy by speaking with an attorney. Before you file, make sure you ask questions and learn as much as possible.

Reach out to a bankruptcy lawyer today for more information.