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What should you know about Chapter 7 bankruptcy?

On Behalf of | May 5, 2024 | Bankruptcy |

Realizing that you can’t pay all your bills each month is difficult. While some people will be able to overcome this kind of deficit in income quickly, others need to turn to the legal system for an answer.

Bankruptcy is a legal option that enables you to take control of your finances. Chapter 7 and Chapter 13 are the two most common forms of consumer bankruptcy. Chapter 13 requires you to make payments to the bankruptcy trustee on a specific schedule, but that’s not required for Chapter 7. Consider these points if you’re thinking about filing Chapter 7 bankruptcy.

How can bankruptcy stop creditor’s collection attempts?

Bankruptcy stops collection attempts because the court issues an automatic stay once you file. This puts all the creditors on the same field for being able to collect what they’re due from the process. In a Chapter 7 bankruptcy, there’s a chance that they won’t be able to collect anything because you don’t have to make payments to the bankruptcy court.

Who can qualify to file a Chapter 7 bankruptcy?

The ability to file a Chapter 7 bankruptcy is based on your current monthly income. You can automatically file if that’s less than the Massachusetts median income. It might be possible to file if it’s higher, but you’d have to take a means test to determine what you can legally do.

What are the personal property exemptions for Chapter 7 bankruptcy?

Chapter 7 bankruptcy is known as liquidation bankruptcy because a bankruptcy trustee can opt to liquidate non-exempt assets to pay off creditors. However, most assets owned by low-income filers are exempt from liquidation, so losing ownership of any assets as a result of bankruptcy is very rare.

If you file in Massachusetts, you can choose between federal exemptions or state exemptions. Going over the differences between these options and learning about your rights and responsibilities is critical if you’re going to file bankruptcy under Chapter 7. Working with a legal representative who can assist with these tasks is beneficial so you can go into the process with an understanding of to expect, and so that you can safeguard as much of your property as possible as you move forward.