Before you use Chapter 7 bankruptcy, you should learn some facts about how it works. By learning facts about Chapter 7, you can make an informed decision about filing. If you are interested in this branch of bankruptcy, here are four crucial facts you should know.
1. You Must Pass an Income Test
The first thing to know is that you cannot use this branch without passing an income test. The test is a standardized test that all lawyers use when evaluating a case. If you earn too much money, you cannot pass the test. In this case, you would not qualify for Chapter 7. You can be eligible if you earn less than the average income in your area. Your lawyer will ask to see your pay stubs to determine if you pass this test.
2. It Will Forgive Some Debts, But Not All
The second thing to know is that Chapter 7 bankruptcy offers forgiveness on some debts, but not all. Your lawyer will evaluate every debt you have and will classify each one. There are two main categories, which are priory debts and non-priority debts. You can receive forgiveness on non-priority debts, while you cannot receive forgiveness on non-priority debts. Therefore, the amount of forgiveness you receive depends on the debts you have.
3. It Takes Around 6 Months from Start to Finish
The next thing to know is the timeframe of a Chapter 7 case. A typical case takes around six months from start to finish, but your case may take less time than this or a little longer. It depends on the factors of your case. If you use Chapter 13, it takes a lot longer than this from start to finish. As a result, many people prefer Chapter 7 over Chapter 13.
4. You May Lose Assets
The last thing you should know is that you may lose assets. Chapter 7 is the branch of law that lawyers call the liquidation branch. They call it this because it may involve surrendering assets for the court to sell. The court sells them to raise money to pay your bills. The court can only take qualifying assets, though, so there is a chance you might not lose any items you own.
Learning as much as you can about the bankruptcy process can help you understand what to expect. If you have questions or want to file, talk to a bankruptcy lawyer today.
For further details on Chapter 7 bankruptcy, get in touch with a bankruptcy attorney.
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