Understanding the basics of Chapter 7 bankruptcy
Those who are considering filing for bankruptcy under Chapter 7 should make sure they understand what this legal process entails.
When faced with significant amounts of debt, people in South Carolina often wonder what they can do to obtain financial freedom once again. One viable solution is Chapter 7 bankruptcy, which, according to the United States Courts, involves selling assets to pay off creditors. Although certain property is considered “exempt” from this process, a trustee manages the process of liquidating the remaining assets and providing the creditors with the profits. Exempt assets can include basic household furnishings, work-related tools and vehicles.
There are several requirements debtors have to meet if they desire to file Chapter 7 bankruptcy. These include the following:
- Debtors who have a current monthly income above the state median must pass a “means test” to determine if the filing would be abusive of the system.
- Debtors must not have filed under Chapter 7, or any other bankruptcy chapter, during the previous 180 days and the petition was dismissed because they failed to follow through with the process.
- Within the prior 180 days before filing, debtors must have completed credit counseling in a group or individual setting from an approved agency.
Since the purpose of Chapter 7 bankruptcy is to give debtors a fresh start after certain debts have been discharged, once this has occurred, those who file are not liable for the discharged debts. However, those interested in filing this type of consumer bankruptcy should remember that some types of debts cannot be discharged during this legal process. For instance, fines, taxes, some student loan obligations and child support cannot be eliminated by filing.
The consequences of filing
The effects of filing Chapter 7 bankruptcy are significant. For example, according to the Federal Trade Commission, those who file bankruptcy under Chapter 7 must wait eight years before they can file for it again.
Additionally, after filing, debtors may find that their credit score drops, and how far it drops depends on their individual credit profile. While a person with spotless credit may not experience a huge drop in their score, someone with poor credit may find that their score is heavily impacted.
Reach out to an attorney
Since filing bankruptcy in South Carolina is associated with significant and long-term consequences, those who are considering filing should approach this decision with care. In this situation, debtors should contact an attorney in their area who can help them determine if filing bankruptcy is the right choice for them.