Coming to the realization that you can’t pay your debts and your daily life bills on your income is a significantly challenging situation. Bankruptcy is a legal option that allows you to reclaim control of your finances. When you decide to file for bankruptcy, you will have to determine what chapter to file under.
A Chapter 7 bankruptcy is available to people who don’t earn much income, relatively speaking. A Chapter 13 bankruptcy is known as a wage earner’s bankruptcy. The means test is used to determine if you can file a Chapter 7 bankruptcy.
What happens during a Chapter 7 bankruptcy?
During a Chapter 7 bankruptcy, you will receive a much needed break from creditor contact. The court will issue an automatic stay once you file for bankruptcy. This prevents creditors from trying to collect money from you in any form, including written or verbal attempts. The automatic stay can also pause lawsuits and garnishments.
There’s also another purpose to the automatic stay. Since creditors won’t likely receive full payment for your debt, the automatic stay ensures no creditor collects beyond what they’re due.
All bankruptcy cases must be handled carefully. Working with a legal professional who has experience with a Chapter 7 bankruptcy may be beneficial since they can help you to ensure that you’re meeting your obligations and that your rights are being protected.