Bankruptcy is a process in which someone in grave financial standing can have some or the entirety of debts eliminated through liquidating assets or following a repayment plan. Chapter 7 bankruptcy is not suitable for someone who wants to keep their assets. After consulting with an affordable lawyer, it may have been decided that filing for Chapter 7 bankruptcy is the best choice for you. Here are several common questions that people tend to have about bankruptcy, particularly the basics of Chapter 7:

How long does it take for Chapter 7 bankruptcy to work?

To file for bankruptcy, it starts by completing certain forms as provided by your bankruptcy attorney. You may then have to attend meetings with creditors and will ultimately receive a portion or all of your debts discharged. There are filing fees to consider, and if you have trouble paying them, you can ask the court for assistance. It takes about 4-6 months before your bankruptcy status and debt discharges are complete. 

Are there limitations to filing for Chapter 7 bankruptcy?

Yes, you are not permitted to file for Chapter 7 if you received a discharge under this chapter within the past eight years. You also cannot file for Chapter 7 bankruptcy if you went through a Chapter 13 bankruptcy case within six years prior. Additionally, you cannot file if a previous Chapter 13 or 7 case was dismissed in the past six months due to fraudulent activity or violating a court order. 


What are dischargeable debts?

Debts are categorized into dischargeable debts and nondischargeable debts. The former is eradicated after filing for bankruptcy, and the latter must still be paid by the debtor after bankruptcy. Many people think that bankruptcy means all of your debts will be eliminated, and while this can happen, it isn’t something that happens for everyone. Your bankruptcy attorney can clarify for you what debts may be discharged and which won’t after filing for Chapter 7 bankruptcy.

What is the “means test?”

The means test is used to compare your earnings to your debts, and whether you have enough disposable income to pay at least a portion of unsecured debts within five years. If you do have enough disposable income, then you may have to file for Chapter 13 bankruptcy instead, which entails a repayment plan and not liquidating any assets. If you are in debt due to operating a business or accumulated debts while on active duty and are now a disabled veteran, then you do not have to take the means test. 

What is the difference between unsecured debts and secured debts?

As your attorney may explain, debt is separated into two classes — unsecured debts and secured debts. Unsecured debts are not related to a property or tangible item, such as hospital bills, school loan debt, and credit card debt. By comparison, secured debts include things such as a vehicle loan or home mortgage.