What is Chapter 7 Bankruptcy and How Does It Work?
The pandemic ushered in one of the most difficult times in the USA. There are millions of people that are finding it difficult to pay their monthly bills. Everyone will like to pay his/her bills, but unfortunately, life happens.
Here’s a quick admonition to you “You are not alone.” There are amazing options out there that can help you to weather the storm. The only thing is that you should be aware of the options you have, what those options will cost you, and the pros and cons of those options. In helping you to understand your options, we’ll help you to:
What is Chapter 7 bankruptcy?
In the most basic definition, Chapter 7 bankruptcy can be defined as a debt relief option that’s created by the government, with the aim to allow debtors to secure relief on their debt. The debt that can be discarded in a bankruptcy discharge includes payday loans, personal loans, medical bills, credit cards and some other types of unsecured loans.
Your expenses and income are evaluated to understand whether you have the capacity to meet your financial obligation (Chapter 13 bankruptcy) or you’re not able to make any payment at all (Chapter 7 bankruptcy).
What are the types of bankruptcy?
The most prominent bankruptcy types include the Chapter 7 bankruptcy, Chapter 11 bankruptcy and Chapter 13 bankruptcy. Another type of bankruptcy is the Chapter 12 bankruptcy that covers commercial fishing debt and farm debt. There is also the less common Chapter 9 and 15 bankruptcies.
We will focus the bulk of our time on Chapter 7 and Chapter 13 bankruptcy as they’re the most common type of consumer bankruptcy, and you should know the difference between the two.
How Does the Chapter 7 Median Income By State Work?
If you want to file for a bankruptcy discharge, chances are high that you will be filing for a Chapter 7 or Chapter 13 bankruptcy.
To qualify for Chapter 7 bankruptcy, you may have to adhere to specific income limits set by the government. For 2021, you should check the Chapter 7 median income by state.
A Chapter 7 Bankruptcy is:
- a) Fast and you will get a discharge within 90 days
- b) Cheaper than most bankruptcy types
- c) Liquidation bankruptcy as you may lose your assets if exemptions do not cover them. The most common question among those that want to file for bankruptcy is “Can I file for bankruptcy and keep my house” and the right answer to that is that it’s is possible but it depends on lots of factors.
- d) A type of bankruptcy that uses household size, income, and state to determine whether you qualify for a discharge or not. You can estimate whether you qualify for the discharge or not by clicking here.
- e) A type of bankruptcy that remains on a credit report for a period of ten years after filing or a discharge.
To get a bankruptcy discharge, most people will have to go through the process of estimating qualification, getting a free bankruptcy attorney consultation, attending necessary meetings, getting a discharge on debt, taking online courses, and providing required documentation and files.
Can I get a mortgage and purchase a home after bankruptcy?
Many individuals are concerned about being able to purchase a home after bankruptcy. Generally, you are able to get a mortgage after bankruptcy, but you should look at options to rebuild your credit to be able to qualify for a mortgage.
How much does bankruptcy cost?
You may be thinking that you cannot afford bankruptcy since it should be an expensive process. You’re not alone here, as most bankruptcy attorneys have payment plans that can help the populace to afford the cost of filing for bankruptcy.
The main cost that’s attached to the process is usually the cost of getting a bankruptcy attorney fee and the cost of filing. The filing fee is usually between $300-$400, while the attorney fee has a wide range.
Before filing for a bankruptcy discharge, it’s best that you first estimate what you’ll pay based on your zip code by taking the free bankruptcy attorney fee estimator.
What are the alternatives to bankruptcy?
There are numerous alternatives to bankruptcy, and we’ll discuss the options at your disposal below. However, I’ll advise that you opt for a free tool that analyzes your expenses and your income. An example of a free tool you can use is Ascend’s free debt freedom portal. The debt freedom portal contains calculators that’ll show you an estimated cost that’s based on your zip code, its pros and cons, and it’ll estimate the options at your disposal.
As stated above, a very essential step is to be acquainted with the options at your disposal, the cost of opting for those options, and their pros and cons—this way, you can be certain that the options you’re opting for are an informed one.
Check Reddit and BK Forums
By searching for declaring bankruptcy on reddit, you may find that there are alternatives that people have done instead of bankruptcy. BK forum is also a great resource.
Call Your Lender
If you’re an individual that’s keen on getting more from your creditors, you should ask for more options that’ll help you keep your credit scores healthy. If you can’t get this option, then consider an option that’ll prevent creditors from staying current on your debt, you can do this by explaining why you’re behind on payment to them.
Debt Payoff Planning
You should carry out debt payoff planning by understanding your budget and looking at how to restructure it. The idea behind debt payoff planning is that you line your debts up and use the avalanche, snowball, or savvy debt payoff method to eliminate debts one after the other. You need to coordinate this effort within your budget. You can find Google sheets out there for coordinating your debt payoff, and I also have one that I’ll love to share.
There are debt management companies that specify in negotiating the interest rates of high credit card debts. Opting for debt management is usually the most ideal option for individuals that have high-interest credit card debt as personal loan company hardly work for companies like this. Also, you don’t need to hire a debt management company for a personal loan as the interest you’ll save is obviously not big enough to justify the cost of hiring the company.
However, my advice for you is that you contact all the credit card companies yourself and negotiate for a lesser payment. You should only embrace this option if your discussion with their representatives doesn’t yield the desired result.
These are companies that negotiate your debt owed with your creditors. This usually leads to more savings than in instances where you opt for debt management. This method has numerous pros and cons, as such, you’ll need to research carefully. I recently carried out a review article that clearly elucidates a highly efficient company in this niche.
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