The language used around bankruptcy can be offputting. It is often described as a “last resort” or said that you are “staring bankruptcy in the face.” However, bankruptcy is more common than you may realize. More than 3,000 people filed for Chapter 7 in Alabama between March 2019 and March 2020. Some states had ten times that number.
Chapter 7 bankruptcy is one of several tools available to get you out of a difficult financial situation, regardless of how you got there. If you are considering bankruptcy, it is essential to know what it can and cannot do.
Can Chapter 7 bankruptcy clear all my debts?
Chapter 7 can clear many of your debts, but it might not remove all of them. Chapter 7 should cover things like credit card debt, personal loans and medical debts, but will not generally affect things like child or spousal support payments, student loans and certain tax debts.
Can anyone file for Chapter 7?
There are certain restrictions placed on who can file for Chapter 7. You must pass a financial means test. If you have more than the allowed amount, you will be ineligible and need to look at other options.
Also, if you have filed for bankruptcy before, there is a time limit on how soon you can file for bankruptcy again. The minimum allowed time is six years after a previous Chapter 13 filing and eight years after Chapter 7.
Is there any reason not to file Chapter 7?
Any form of bankruptcy will affect your credit rating, but so will continuing to miss payment deadlines. One reason many people choose other options is that Chapter 7 may require you to liquidate some of your assets — although many exemptions in the law allow debtors to keep most of what they own.
Bankruptcy is a complicated matter, so it is best to seek legal advice to assess your situation and discover the best solution. Just know that you aren’t alone in your situation. Many others have experienced similar financial struggles and turned to bankruptcy for relief.