Those who use Chapter 7 bankruptcy are given the chance to liquidate non-exempt assets, pay off creditors with the money and then have the rest of the debt erased. The exact amount that is paid off and erased is different in every case, depending on the level of debt, the value of the non-exempt assets, how many assets you’re actually allowed to keep, and many other factors.
However, you may not qualify for Chapter 7 if you’re still working. There is an income requirement or means test, and you can earn so much that you’re not allowed to file. Essentially, if you make over the limit, the government determines that erasing your debt would not be just and you should pay it back instead.
What can you do?
However, not qualifying for Chapter 7 bankruptcy doesn’t mean you have no options left. Perhaps you still can’t afford your debt as it is currently structured. You may qualify for Chapter 13 bankruptcy, which gives you a chance to consolidate that debt into a single monthly payment. You then make that payment for the next three to five years and eliminate your debt this way. As a wage earner, this may be the best option for you, even if it is not what you traditionally thought of when you considered filing for bankruptcy.
Looking into your options
You can see how crucial it is to understand all of your options when considering what to do about your debt. From Chapter 7 to Chapter 13, there may be a plan that works for you at this point in your life.