Chapter 7 bankruptcy, also known as straight bankruptcy is the liquidation of all debt. In Chapter 7, all of the debtor’s nonexempt assets that have significant value are distributed to creditors to pay off debts. Once debts are paid off the debtor receives a discharge. A typical Chapter 7 bankruptcy lasts from 3-6 months. Here are four facts you need to know before filing a for Chapter 7 bankruptcy.
- Chapter 7 Bankruptcy Can Only be Filed Once Every Eight Years
Chapter 7 bankruptcy is not your trump card you can play over and over again. If you receive a discharge during your Chapter 7, then you are not eligible to file again for eight years. The good news is that most debtors do not refile for Chapter 7.
- Not Everyone Can File for Chapter 7
Unfortunately, not everyone can file for Chapter 7. To qualify for a chapter 7, a debtor would have to pass the Chapter 7 means test. There is technically not an income requirement, but you must prove that your debts outweigh your ability to pay them back. There are many instances where debtor’s simply make too much to file a Chapter 7. If this is the case, then the only available option is Chapter 13.
- Chapter 7 Will Relieve Many (Not All) Debts
Certain debts cannot be placed into a bankruptcy. Child support and alimony cannot be wiped out by filing a Tennessee bankruptcy. The same thing goes for federal student loans and some tax debt. Credit cards, personal loans, medical bills, and repossessed car loans can all be discharged. You can also surrender a mortgage or car loan that you can no longer afford, forfeit the property and wipe out the debt.
- Chapter 7 Bankruptcy Will Impact Your Credit Score
A Chapter 7 bankruptcy will affect your credit score in many ways, which is a concern for many debtors’. A Chapter 7 bankruptcy will drop your credit score initially, and it will also appear on your report for ten years. The good news is that my law firm offers a Free program to all clients that will help get your credit score back to where it needs to be.
Deciding to file for bankruptcy is a difficult decision to make. For more information regarding Chapter 7 or Chapter 13 call my office for a Free no obligation consultation 423-267-8000.
Written by: Rebecca Kidd