Personal bankruptcy protections are able to help struggling consumers with crushing medical debt, credit card debt or who may be worried about hanging on to their family home through the foreclosure process. There are different types of personal bankruptcy protection which is why struggling consumers considering filing for bankruptcy should know about Chapter 7 bankruptcy.
Following are some Chapter 7 bankruptcy basics for struggling consumers:
- Liquidation bankruptcy option: Chapter 7 bankruptcy is considered a liquidation bankruptcy option that allows the filing party to liquidate non-exempt property to repay creditors and enjoy debt relief.
- Automatic stay protections: this blog has previously discussed that whatever type of bankruptcy the filing party chooses, the automatic stay goes into effect once they have filed for bankruptcy protection that prevents further creditor collection actions during the bankruptcy process.
How to qualify for Chapter 7 bankruptcy
The means test is used to determine if the filing party qualifies for Chapter 7 bankruptcy protection. The means test compares the filing party’s average income for the 6 months prior to filing for bankruptcy to their states median income. If it is equal to, or less than, their state’s median income, they can qualify. It is not, other personal bankruptcy options are available.
Chapter 7 bankruptcy exemptions
Chapter 7 bankruptcy exemptions protect certain types and categories of property, subject to certain limits, from the bankruptcy process. Wild card exemptions may also be available for property that has reached the limit for a particular category or does not fall into a named category.
Understanding the different personal bankruptcy options can help struggling consumers considering filing for bankruptcy determine which option is best for them and their situation. It can help them seek the debt relief they need.