Before you make the decision to file for Chapter 7 bankruptcy, you should decide whether or not it really is the best solution for you. There are three important questions you should ask yourself to determine whether Chapter 7 bankruptcy is the best option.
- How much of your debt will be discharged in Chapter 7 bankruptcy?
- Can your creditors obtain a judgment against you and take income or assets?
- Will you have to give up some of your assets to pay off debts?
Discharging Debt in Chapter 7 Bankruptcy
If most of your debt is unsecured, such as credit card debt or medical bills, then you may benefit from a bankruptcy discharge. However, Chapter 7 bankruptcy cannot discharge all debts. If the majority of your debt is nondischargeable, then bankruptcy may not be for you. Some nondischargeable debts include:
- Unpaid child support
- Income taxes due in the last three years
- Court ordered awards for personal injury or wrongful death cases
- Student loan debt
- Debt incurred by fraud
Creditor Lawsuits and Judgements
With most unsecured debt, a creditor would require a court order before they can seize assets or garnish wages. If a creditor files a lawsuit to obtain a judgment against you, filing bankruptcy may be the best way to protect your earnings and property.
If most or all of your income comes from Social Security (which can’t be taken by creditors) and your property is protected, however, then your creditors probably can’t get anything from you anyway, meaning bankruptcy may not be needed.
Giving Up Property in Chapter 7 Bankruptcy
If you are thinking about filing for Chapter 7 bankruptcy, you will want to figure out how much of your stuff you’ll have to give up to pay creditors. In most cases, petitioners rarely have to give up much, if any, of their possessions in Chapter 7 bankruptcy. There are a number of exemptions available to help you protect much of your property, including but not limited to:
- Life insurance
- Public benefits
You can use exemption to protect these and other assets up to a certain value, but after you’ve used up the exemptions, a bankruptcy trustee may sell off what’s left over to pay off debts. Talk with a bankruptcy attorney to find out more about bankruptcy exemptions.
For a free consultation, contact the Manalapan bankruptcy lawyers with Garland & Mason, LLC.