When you file for bankruptcy, you are looking for relief from stress; the last thing you want is more of it. You may be worried that the bankruptcy process will be challenging. You may be unsure of what it involves. The right bankruptcy lawyer, however, will take the stress of bankruptcy off your shoulders and answer your questions so that you can focus on the much brighter future.
Below are some of the key things you should know about Chapter 7 bankruptcy:
- Eligibility: You are eligible for Chapter 7 bankruptcy if you pass the Chapter 7 means test. Generally, if your income is less than the state median, you can file for Chapter 7. If your income is more than the state median, the court will determine if your aggregate current monthly income over the last five years (minus certain expenses) is more than $11,725 or 25 percent of your nonpriority unsecured debt (which must be at least $7,025). If so, then you will not be able to file a Chapter 7 bankruptcy.
- The bankruptcy trustee: The bankruptcy trustee is in charge of impartially overseeing the bankruptcy proceedings. His or her principal role is to gather and sell nonexempt assets to pay back creditors. In most cases, however, the debtor will have few assets and the trustee will file a "no asset" report with the court, allowing the debtor to keep his or her property.
- Discharging debts: More than 99 percent of debtors receive a discharge during a Chapter 7 bankruptcy. The court will usually issue a discharge order within one or two months after the creditor meeting date is set. It is common to receive a discharge for most debt, with some exceptions (such as college loans).
- Fees: It may surprise you that you must pay a fee to file bankruptcy, but the court will charge a $245 case filing fee, a $46 administrative fee and a $15 trustee surcharge. You may be able to pay this amount in installments or waive the fee altogether if your income is lower than 150 percent of the poverty level.
Bankruptcy stops creditor harassment and foreclosure. In other words, creditors will not be able to contact you regarding your debts during the bankruptcy. This is just one more reason why filing for bankruptcy, as scary as it may seem, is often a good idea if you have overwhelming debt.