Should You Pursue Chapter 7 Bankruptcy?

When you feel like you have no hope of overcoming your financial hurdles, you might want to give up. Before you give up, you could consider looking into Chapter 7 bankruptcy. Chapter 7 helps people who need extreme financial relief from debt, and it might also help you. If you are uncertain whether this is a good choice or not, here are some tests to complete that might help you find the answer.

Learn the Basic Principles of Chapter 7 Bankruptcy

Before using a debt relief program, including bankruptcy, you may want to learn the basic principles of the program first. Chapter 7 bankruptcy has just a few main principles to know before using it. The first is that it provides forgiveness of qualifying debt. Forgiveness is not for all debts you owe, it only covers qualifying debts. A bankruptcy law attorney can explain which debts qualify and which do not. The second principle is that it does not require repayment of these debts. If your debts qualify for forgiveness and you file for Chapter 7, you will never have to repay them. The third principle is that you might have to turn in some of your assets in exchange for debt forgiveness.

You might want to ask your lawyer about the timeline, requirements, and rules of Chapter 7 before proceeding.

Complete the Income Test

The next way to determine if you should file for Chapter 7 is to complete the income test. This test is one that your lawyer will complete at your first visit. The test compares your current income to the state's average income. You cannot use this branch of bankruptcy if you do not pass the test. Passing the test requires that you earn less income than the stated average.

Separate Your Debts

While you are at your visit, ask your lawyer which debts qualify for forgiveness and which do not. Your lawyer can tell you the answer to this question by examining your debts. If your debts fall into the qualifying category, using Chapter 7 might be beneficial. If most debts do not fall into this category, Chapter 7 would be of little help.

Determine the Potential Outcome

The final thing to do is discuss the overall case with your attorney to learn the potential outcome of filing. If you discover that filing for Chapter 7 would provide the relief you need, you might want to go through with it. Talk to your bankruptcy attorney to learn more.