When you have a mountain of debt notices stacking up in front of you, all you want to do is find a way out, but you don’t know how. Fortunately, there are existing laws that allow those who are deeply in debt to rise above this challenging time. The most prevalent is declaring bankruptcy.
If your debts have grown overwhelming or you face foreclosure on your house, you may consider filing for bankruptcy. A bankruptcy filing allows you to discharge some of your debts. However, there are certain repercussions you must face, such as selling your non-exempt properties to pay off the unsecured debt you owe.
Furthermore, you can file for bankruptcy in a variety of ways. One of which is Chapter 7, which oversees the liquidation of your non-exempt assets.
Read on to learn whether or not you can qualify to file under Chapter 7 bankruptcy, what it is all about, and other essential things you need to know as explained by one of the best bankruptcy attorneys in Monroe, Louisiana, E Orum Young.
What is Bankruptcy Chapter 7?
Chapter 7 bankruptcy allows a person with overwhelming debt to lessen or eliminate them by liquidating assets. This means that you have to give up some of your properties or valuable things like jewelry in order to pay your debts.
The liquidation process is governed by the rules under Chapter 7, which is why it is frequently referred to as a “straight” or “liquidation” bankruptcy. It is the quickest and most common type of bankruptcy.
Generally, when paying off your debts, it is done in this sequence: your unsecured debts are then followed by the secured debts.
Unsecured debt is a debt that has no collateral, which implies that if the loan has defaulted, the creditor has no alternative way to reclaim the money they lost. Secured debt, on the other hand, refers to debt with collateral. For example, if you apply for a car loan and they ask for collateral, you may provide the title to your home as collateral. So, if you become suddenly delinquent in your debt payments, they can seize your property as a method of repaying your obligation to them.
What is a bankruptcy trustee?
When you file for bankruptcy, your case will be assigned to a bankruptcy trustee. Bankruptcy trustees are the people that assist you in gathering and categorizing your properties in order to sell them. They can also make suggestions to the court about your case. Moreover, it is important to know that they can not just waltz into your lives and decide what to sell.
They will need a court order to carry out some of their functions involved in liquidating your assets. So if you are worried that they might sell everything, there is no need to be because the bankruptcy law is in place to protect both debtor and creditor.
Can I file for a Chapter 7 bankruptcy?
At this time, you may be considering filing a Chapter 7 bankruptcy petition. If that is the path you wish to follow, it is important to understand the many requirements you must first pursue in order to file a bankruptcy case.
Filing for bankruptcy is not simple; you may need to jump through some hoops in order to qualify, so keep the following conditions in mind to see whether you are eligible:
- You must not have filed for Chapter 7 bankruptcy within the last eight years.
- You must wait at least 181 days before filing again if you had filed for Chapter 7 bankruptcy before but were denied by the court.
- Take a means test.
A means test is intended to distinguish between high-income and low-income earners when filing a Chapter 7 bankruptcy case. Chapter 7 mostly caters to low-income earners. This implies that this test will help you assess if your income is low enough to file a Chapter 7 bankruptcy case.
Suppose your average monthly income is lower than the median income for the same-sized household in your state within six months. In that case, it is okay to proceed with filing a bankruptcy petition under Chapter 7.
This test will consider your financial information, such as your average income, how much expenses you have, and the number of people in your household. The means test is only required for people who have consumer debts, such as credit cards or medical debt; you do not need to pass the means test if your debt is mainly from a business you own.
1. Attend a credit counseling session.
In order to file for bankruptcy, you must first attend a counseling session. According to Louisiana state law, you must attend a credit counseling session within 6 months before you file for a Chapter 7 bankruptcy. You must obtain it from a U.S. Trustee accredited agency.
You might be wondering what it’s all about. Credit counseling is a type of intervention before you file for bankruptcy. The counselor assigned to you will go over the various options that you can take before you to file a bankruptcy petition. Both of you will go through your financial situation, such as how much debt you owe to creditors, what kind of debts you have, how much money you make, and so on. As a result, they will provide you with a budget plan.
If, after such intervention, you still decide to file a bankruptcy petition, you must get the certificate issued by the counseling agency. It is critical that you remember to include it with your bankruptcy petition.
Remember that if you do not comply with this condition, the court will almost certainly dismiss your petition therefore, it is preferable to attend one than miss your chance to file for bankruptcy.
2. Gather important documents and finish filling out your bankruptcy petition.
After passing the means test and receiving a certificate from your certified credit counseling agency, the next thing you need is to collect all important documents and finish filling out your bankruptcy petition.
You will be required to fill out the petition form with details about your finances, such as how many creditors you have, your assets, income, and so on. You will also require legal documentation to back up your claims on the form. Your bankruptcy trustee will also utilize this.
It may not appear difficult, but you will need our help.
You will think that it is not that difficult after reading the article, but there are some steps or qualifications that need the assistance of a bankruptcy attorney. Having a bankruptcy lawyer by your side will help you in navigating the bankruptcy proceedings. Bankruptcy attorneys are the ones who understand the complexities of bankruptcy rules. They will advise you on the appropriate course of action to pursue, such as which bankruptcy chapter to file..
Talk to our bankruptcy lawyers at E Orum Young, who have the expertise in these types of cases and are well-versed in Louisiana bankruptcy proceedings. We are here to assist you in determining the best form of bankruptcy for you, and we will walk you through the intricate process of filing a bankruptcy petition or claim.