Chapter 7 bankruptcy provides a chance for borrowers to eliminate some of their debt and start fresh. However, bankruptcy law is extremely complex, and common misconceptions can make it challenging to determine whether liquidation is right for you. Below are answers to some common questions you may have about filing for Chapter 7 bankruptcy protection to help you decide.

What You Should Know About Chapter 7 Bankruptcy

What kinds of debts can Chapter 7 discharge?

Chapter 7 bankruptcy can eliminate most unsecured debts, such as credit cards, store charge accounts, medical bills, lawsuit judgments, and some income tax debts. However, you cannot discharge student loans, criminal fines, unpaid child support, and some other types of unsecured debt. This means that you must still pay these back after bankruptcy.

Will the court seize all of my assets?

In exchange for eliminating your unsecured debts, the trustee of the court can seize some of your assets to pay back creditors. However, Missouri bankruptcy law allows petitioners to exempt certain personal possessions, so many borrowers don’t have to surrender everything. For instance, you can exempt up to $15,000 in home equity, tools, wedding rings, and Social Security benefits, as well as items that help you run a business.

Can anyone file for Chapter 7 bankruptcy?

To successfully discharge your debts, you must pass a means test to demonstrate that you cannot meet your financial obligations. Families whose income is less than the average for their state will automatically qualify for discharge. However, if you make more than the average, your attorney must submit a detailed financial accounting that proves your debt burden is more than you can bear.

Can Chapter 7 bankruptcy prevent foreclosure?

Chapter 7 bankruptcy helps individuals deal with unsecured debt, so it cannot prevent a foreclosure. However, filing for bankruptcy triggers an automatic stay, which pauses foreclosure proceedings until the case concludes. This gives you time to negotiate with the bank or arrange a short sale.

Since 1973, Hackworth, Ferguson & Thompson in Piedmont, MO, has been helping struggling borrowers throughout southeast Missouri work through financial hardship. Their legal team can help you determine whether filing for bankruptcy fits your situation and will guide you through every step of the process. Visit the website for more information about their bankruptcy law services. Call (573) 223-4247 to schedule an initial consultation.