There are days it may be harder to make ends meet. Whether you’re staring down the barrel of an impending divorce, lost job or global pandemic, it might seem like it’s getting harder and harder to pay the monthly bills. You might have even thought in desperation: what is waiting at the end of this dismal financial tunnel?
Luckily, the government provides your finances with a “get out of jail free” card—otherwise known as Chapter 7 bankruptcy.
What Is Chapter 7 Bankruptcy?
Otherwise known as “straight” or “liquidation” bankruptcy, Chapter 7 presents business or individuals the opportunity to clear all of their debts. While this might seem like a magical solution, the process ends up being a bit more convoluted. When an individual files for bankruptcy, the court appoints them a trustee. This trustee will oversee your case and calculate the cost of all your assets. Once they determine what your assets are worth, they will sell or liquidate them in order to pay off all creditors.
Will I Lose Everything I Own?
The simple answer — no. The trustee will divide your assets into two categories: exempt and non-exempt. Exempt items are protected from trustees and usually include any items required for your life and work. These items are usually pre-exempted by the federal government, so you don’t have a lot of say over what stays and what goes. The usual suspects on the exempt list include:
- Primary household
- Primary vehicle
- Some retirement accounts
- Anything deemed necessary for work purposes (i.e. laptop)
Anything else will be considered “non-exempt” and can potentially be liquidated by the trustee.
How Do I Prepare?
Filing for bankruptcy can take time and patience since the initial process can take between 80 and 100 days. The best way to expedite this process is to prepare all documents before submitting to the court. You will need to gather:
- Any financial records including credit card statements, pay stubs and bank statements
- Petition for relief
- Statement of financial affairs
- Listing of assets and liabilities
You can decide whether or not to consult with an attorney before going through the filing process. While hiring an attorney is not a requirement, a chapter 7 bankruptcy lawyer in Waterbury, CT will be able to help you gather the materials and present your claim to the court.
Once you complete the initial filing, you will most likely be asked to attend a creditor meeting and complete a financial management course. Once these steps are completed, the court will discharge your debts, stopping any creditors from attempting to collect anymore payment. Once you receive your discharge, your bankruptcy claim has officially ended and you are free to begin rebuilding your credit.
Thanks to The Law Offices of Ronald I. Chorches for their insight into bankruptcy law and chapter 7 bankruptcy.