If you are dealing with serious debt problems and considering filing for Chapter 7 bankruptcy, it is worthwhile to understand how everything works. That way, you will be better prepared on what to expect when navigating the entire bankruptcy process and getting the much-needed financial relief.
When you file for Chapter 7 bankruptcy, you will likely lose some of your assets which the bankruptcy trustee will sell and use the proceeds to settle your debts. However, you can protect eligible assets or personal possessions but only up to a certain value from being sold off by applying for bankruptcy exemptions.
Most unsecured debts will be discharged
Chapter 7 bankruptcy works by discharging your debts that remain unpaid after selling your assets. When debt is discharged, you do not have to pay it back, which allows you to rebuild your finances and credit rating. Some of the dischargeable debts in a Chapter 7 bankruptcy include:
- Credit card debt
- Utility bills
- Rent due
- Medical bills
However, Chapter 7 does not discharge all the debt in your name. Debts like alimony, child support, or those associated with fraud or criminal activities like a DUI violation are non-dischargeable. Additionally, if you left out debt when filing for bankruptcy and it was therefore not discharged, you are legally obligated to pay it.
Are you thinking of filing for bankruptcy?
The first thing you should do is prepare yourself financially, mentally, and emotionally. Filing for bankruptcy could be among your lowest moments in life, and you need to be ready to deal with any personal issues that may arise.
Most importantly, you should consider getting help if you are unsure or have doubts about what to do before, during, or after filing for bankruptcy. Having the necessary guidance will help you regain financial stability much faster and weather the bankruptcy storm.