Filing for bankruptcy may not be an ideal financial situation, but it does offer a solution for alleviating debts when you don’t have the means to pay them without assistance. If you’re in this situation, you might consider Chapter 7 bankruptcy. While a bankruptcy attorney will walk you through the process, here's a brief guide to prepare you.

What to Know About Chapter 7 Bankruptcy

What does Chapter 7 bankruptcy entail?

This form of bankruptcy is also known as fresh start or liquidation bankruptcy. It absolves you of most debts by selling any nonexempt assets to pay your creditors. This triggers an automatic stay, which requires creditors to cease their efforts to collect debts. 

A court-appointed trustee will take control of your finances. Most individuals own little nonexempt property, so you can still retain many belongings with this option. 

How is Chapter 7 different from Chapter 13?

Although Chapter 7 wipes out your debts, Chapter 13 requires the repayment of them. With Chapter 13, bankruptcy attorneys collaborate with creditors and the court to develop a repayment plan that will span three to five years.

Chapter 7 is an ideal alternative for anyone with limited means for repaying creditors. With that in mind, Chapter 7 does stay on your credit report for up to 10 years, while Chapter 13 is removed within seven. 

Who qualifies for Chapter 7?

Individuals with a permanent residence or business are eligible for Chapter 7. You can qualify for the cancellation of debts if your monthly income is less than or equal to the median family income in your state. 

It’s also required that you have insufficient income to repay debts. This will be determined through a process known as the means test.   

Can I keep my house with Chapter 7?

If you’ve maintained your mortgage payments, you may be able to stay in your home if the equity you’ve paid is considered an exempt asset. This is known as the homestead exemption, allowing homeowners to keep some equity even if they’ve filed for bankruptcy. In North Carolina, for example, up to $35,000 of your equity is protected, but couples filing jointly can double this exemption.

If you’re looking to regain your financial footing, turn to Ferguson, Hayes, Hawkins & DeMay PLLC for legal assistance. These bankruptcy attorneys have more than 40 years of combined experience and are committed to pursuing the best outcomes for their clients throughout Downtown Concord, NC. Find out more about their approach to bankruptcy law online, or schedule an appointment by calling (704) 788-3211. Text LAWYER to (910) 830-0939 for special promo information.