4 Things To Know About Filing For Chapter 7 Bankruptcy

Posted on: 8 October 2017

Many people have to file for bankruptcy due to accumulating large amounts of debt. This debt can be the result of medical bills, a job loss, divorce, or loss of income for a family when a spouse dies unexpectedly. Individuals can file for chapter 7 or chapter 13; which type of bankruptcy is best for you will depend on your financial situation, and an attorney will be able to advise you. If an attorney says that you qualify for chapter 7 bankruptcy, it is important to know the following things:

Fresh Financial Start

Unlike chapter 13 bankruptcy, a chapter 7 bankruptcy will discharge most of the debt that you may have. When you file for chapter 7 bankruptcy, your creditors will be required to cease any attempts to collect past due bills owed. After your bankruptcy is finalized by the court, you will no longer be liable for the debts that were discharged in bankruptcy court.

Not All Debts are Discharged

While the vast majority of debt is discharged when the court approves a chapter 7 bankruptcy filing, it is important to know that there are some types of debts that are exempt from bankruptcy. Alimony, child support, federal student loans, and some types of back taxes can't be discharged in bankruptcy court. In addition, if a court has determined that you are liable for a wrongful death or injury case, you will still be responsible for paying that debt.

Chapter 7 Bankruptcy Can Be Rejected by the Court

Filing for chapter 7 bankruptcy does not automatically guarantee that it will be approved. The court may choose to reject your filing if you can't produce adequate financial records, try to hide assets during the bankruptcy process, commit perjury, purposely incur additional debt immediately before or during the bankruptcy process, or can't explain the circumstances that led to loss of income or accumulation of debt. When filing for chapter 7 bankruptcy, it is in your best interest to keep all of your financial records in order and to be as honest as possible with your lawyer and the judge.

You May Lose Some Assets

Depending on your current financial situation, you may lose some assets when you are approved for chapter 7 bankruptcy. For example, if you own a vacation home, recreational vehicle, boat, or any other asset that is not necessary for day-to-day living, the court may order that those assets need to be sold; the proceeds from the sale of these types of assets will be distributed to your creditors.