You might be looking for a way out of debt right now. If so, there is good news. You can use many programs for this purpose, and one option is Chapter 7 bankruptcy. Bankruptcy is not an event that will leave you completely debt-free, but it can make a significant difference with your debt load. Here is an explanation of how Chapter 7 treats debts and information about what will happen to your debt if you file.
Your Lawyer Analyzes Your Debts
Before you file for Chapter 7, you will meet with an attorney to learn more about bankruptcy. One goal of this meeting is to determine if you meet the requirements for Chapter 7. The main one involves your income level. If you earn too much money, you will not qualify. If you meet this requirement, your lawyer will analyze your debts. The purpose of analyzing your debt is to see what types you have. In Chapter 7, the court divides debts into two main categories:
- Qualifying debts — Debts that the court wipes out through Chapter 7
- Non-qualifying debts — Debts you will still owe after using Chapter 7
If you discover that most of your debts will not qualify for a discharge, you might want to find a different way out of debt. Chapter 7 is a great option when most debts fall into the qualifying debt category.
You Request a Discharge on the Qualifying Ones
If you decide to go through with filing your case, your lawyer will ask the court for a discharge on all your qualifying debts. You might receive a discharge on all your credit card debt, medical bills, and personal loans. If the court approves your case and creditors do not object, you will likely receive forgiveness on all these debts.
You Must Repay the Others
When you file, you might have debts that do not meet the requirements for a discharge. If this happens, you will have to pay these bills. Any debts that your case does not discharge are debts that you still legally owe, even after filing for Chapter 7. You will know which ones these are when you file.
Chapter 7 often leaves people with fewer debts and more cash in their pockets to pay their bills. If you need some help with your finances and debts, contact a local bankruptcy attorney to learn more about the process.