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What is Chapter 7 bankruptcy, and is it an option for you?

| Mar 2, 2021 | Chapter 7 Bankruptcy

Whether it was a pile of unexpected medical bills or maxed-out credit cards, you somehow got mired in debt. Usually, filing for a Chapter 7 bankruptcy is viewed as a last resort for those struggling with debt, but that doesn’t make it all bad. While it can have some long-lasting effects on your credit score, filing for bankruptcy also has the potential to eliminate the debts that are causing financial strain.

Chapter 7 bankruptcy liquidates assets to repay debts. With Chapter 7 bankruptcy, you can eliminate many of your unsecured debts if you can no longer afford to make your monthly payments or pay those debts off.

Who can file a Chapter 7 bankruptcy?

To file for a Chapter 7 bankruptcy, you normally have to meet a few requirements. These may include:

  • Not having a Chapter 13 bankruptcy in the last six years or a Chapter 7 bankruptcy in the last eight years
  • Not having a dismissed bankruptcy case in the last 180 days
  • Showing that you have an income that is less than the median income for your household’s size in Alabama over the last six months
  • Passing or failing the means test, which will determine if you can afford to pay back any portion of what you owe
  • Taking a credit counseling course within 180 days of your application

If you can show these factors are true in your situation, then you should be able to seek a Chapter 7 bankruptcy. This bankruptcy can help you reduce your liability. While you may have to give up some of your assets, there are many exemptions that can help you keep much of what you own. Our website has more on what to expect if you want to use bankruptcy to get a fresh financial start.