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Is Chapter 7 bankruptcy a good option

For those suffering from ever-increasing financial stress and mounting debt, Chapter 7 bankruptcy can offer substantial relief. However, the law does set out some fairly specific requirements for who can file and what types of debts you can discharge this way.

Knowing the basics of Chapter 7 can give you a better idea of whether this could be the right solution for you. Of course, be sure to discuss specifics with a qualified attorney who can more fully explain your options.

What Chapter 7 does

Chapter 7 is one of two types of bankruptcy available to individuals (as opposed to business entities). It also goes by the name of a liquidation bankruptcy. This is because the basic idea of a Chapter 7 consists of selling off nonexempt assets, repaying part of the debts from the proceeds and discharging the rest.

Income requirements

Chapter 7 typically takes about three to six months to complete. The law does not limit the amount of debt you may discharge this way. However, there is an income limit. Generally, people at or below the median income for Florida qualify to file this petition.

Those with incomes above the median must undergo an additional test. They must assess their disposable income, which is what is left after paying for necessities such as rent, food, transportation, insurance and so on. Usually, courts look at whether there is enough disposable income to make monthly debt repayments. If yes, the petitioner may need to file a Chapter 13 instead.

Other qualifications

Other requirements for prospective Chapter 7 debtors include getting credit counseling from an approved organization. Individuals may be disqualified from filing a petition if they had a previous bankruptcy dismissed in the preceding 180 days before the current filing because they purposely missed a court appearance or otherwise disobeyed court orders.

Effective help for credit card debt

Some types of personal property, including residences below a certain value, may be exempt from the Chapter 7 liquidation, so you would get to keep them. Chapter 7 may not help with various types of secured debt. But if you have a lot of unsecured consumer debt, Chapter 7 may present an effective solution.

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Paul Urich
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Law Office of Paul L. Urich, P.A.
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