4 Facts About Chapter 7 Bankruptcy

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A common legal tool people can use to fix up their credit is bankruptcy. While it may not be the first thing to spring to mind, it is something that can bring about a significant and positive change in someone’s life. Bill collectors can be ruthless, and some even file lawsuits against those who ignore their calls and letters. Deciding to file Chapter 7 bankruptcy may not be easy, but it can help hit the reset button on a person’s financial picture. Discover these four facts about Chapter 7 and what it can do.

  1. Your Paycheck Qualifies You

Chapter 7 is not a viable option for everyone in debt. Part of this is because there is an income threshold that goes along with qualifying for Chapter 7. If a person makes too much or too little, they may not be able to file for relief under this chapter. In Chapter 7, a trustee gathers assets and liabilities and decides what to sell and what to pay. The most important debts are secured, or those like mortgages. Unsecured debt, like credit cards, typically get addressed last.

  1. You May Have To Sell Certain Assets

The trustee will weight the cost and value of selling some of the items you own. However, some property is exempt. The trustee usually does not force the sale of a house, unless the house is on the verge of being foreclosed upon or in foreclosure already. Most things that get sold are luxury items or assets, like stocks, bonds, jewelry and vacation homes. There are some instances in which boats and cars are returned to the bank in exchange for a wash of the remaining debt.

  1. Your Trustee Will Determine Who Gets What

A trustee is someone who is appointed by the court to handle the case. This is not an attorney, but a neutral representative of the court. The trustee is tasked with collecting all of the debts and all of the assets. If a trustee recommends something to a judge, they are likely to listen.

  1. Your Debts Are Discharged

After anything eligible for sale is gone, there may still be remaining debt. Likely, there is not enough cash to pay for everything, although in some instances, it may. If there is remaining debt after payments are made, the remaining burden is discharged or gone.