Chapter 7 Bankruptcy - When is it Time to Consider it?

If you have trouble repaying your debt, one option to consider is filing for Chapter 7 bankruptcy. This is a legal proceeding executed under the guidance of a bankruptcy trustee. During Chapter 7 bankruptcy, a debtor’s non-exempt property is liquidated (turned into cash) and then distributed among the debtor’s creditors. When through, all of the filer’s debt considered dischargeable is discharged.

Most individuals seeking consumer bankruptcy protection do so after losing a job, after experiencing marital trouble, after generating considerable medical bills or other unexpected expenses, or simply because they have not managed credit responsibly.

In order to file for Chapter 7 bankruptcy, you must meet certain conditions. For starters, you must live in, or have a place of residence or business in, or have property located in the US or in a municipality. During the previous six years, you cannot have had granted a Chapter 7 discharge nor can you have completed a plan under Chapter 13. During the six months prior to filing Chapter 7 you also cannot have had dismissed for cause a bankruptcy filing.

Granting debtor relief cannot be considered fundamentally unfair nor can this type of relief be considered a “substantial abuse” of the protections afforded under Chapter 7. This is defined by calculating the amount of money remaining each month after a debtor covers the cost of necessities. If no or little money is available to pay towards debt, filing for Chapter 7 and discharging that debt would not be considered a substantial abuse.

Disclaimer: The general information presented here relates to Chapter 7 consumer bankruptcy. This discussion is incomplete and does not involve consumer debt restructuring as defined under Chapter 13 bankruptcy; a different type of bankruptcy filing. The information presented is not meant as a legal opinion and should not be used as a substitute for legal advice. For detailed information regarding Chapter 7 consumer bankruptcy, refer to your state’s bankruptcy laws. For specific and complete information regarding how state bankruptcy laws affect your personal situation, it is advisable to seek independent legal representation.