When you think about bankruptcy, you’re usually thinking about Chapter 7. Though there are many excellent reasons to choose Chapter 13 if you’re looking to the federal court system to get out of debt, the vast majority of people look to Chapter 7 as the bellweather.
Chapter 7 bankruptcy is designed for individuals (and married couples) who can’t pay their bills. If your monthly income less your regular monthly expenses doesn’t leave you with enough money to make significant payments to your creditors then you’re definitely looking at a Chapter 7 scenario.
That’s not to say that you’ve got the ability to live large and then blame your problems on your high expenses. If you’re looking to get out of debt with bankruptcy then your lawyer and, ultimately, your Chapter 7 bankruptcy trustee will be looking over your monthly expenses to make sure you’re not playing fast and loose with the system.
The Point Of Chapter 7 Bankruptcy
When your case is filed, a Chapter 7 bankruptcy trustee is appointed to take control of all property that is not specifically exempt; you get to keep many types of property because the law lets you keep it. In return, the court allows you to wipe out many types of debts.
Generally, you will be able to wipe out the following types of debts in Chapter 7:
- credit cards
- store cards
- medical and dental bills
- unsecured personal loans
- certain taxes
There are other types of debts that may be able to be discharged (wiped out), but this is just a broad overview. Your lawyer will go through your debts with you and let you know what you’ll remain liable for at the end of the case.
Your Property In Chapter 7 Bankruptcy
You probably read about the Chapter 7 bankruptcy trustee taking control of your property and immediately felt your chest clench in anticipation and anxiety. In the words of Douglas Adams, don’t panic. In fact, most people who file Chapter 7 bankruptcy get to keep all of their personal belongings.
The reason for this is simple. If you’re going to be filing for bankruptcy then you’re going to want to have a good lawyer working with you. That lawyer’s going to be able to tell you if you’d lose something in a Chapter 7; if so, chances are pretty good that you’ll either decide against bankruptcy or file a Chapter 13 instead.
See? It’s a self-fulfilling prophesy.
