A bankruptcy may seem like something that would permanently harm your credit or ruin your life. You might think it would leave you with little to nothing to your name and that you'll have to start over. Depending on your circumstances, you may believe that it is too much to risk.
The reality is that the idea of being left with nothing is a myth about bankruptcy. In fact, there are several kinds of bankruptcy that can help you keep most, if not all, of your assets. The primary form of bankruptcy that people use is Chapter 7 liquidation, which requires the sale of nonexempt assets to pay down debts.
Who can file for Chapter 7 bankruptcy?
Those who can file for Chapter 7 bankruptcy include people who meet the Chapter 7 requirements. These requirements may change, so it's important to speak with your attorney about them before determining if you qualify for Chapter 7 bankruptcy.
Some of the general requirements include:
- Having an income that is below the current Chapter 7 limit
- Not having enough disposable income remaining after necessities to pay back some debt
- Not having filed a Chapter 7 bankruptcy within the last eight years or a Chapter 13 bankruptcy within the last six
You will also have to show that you met the credit counseling requirement, did not previously have a bankruptcy case dismissed and that you did not defraud creditors.
What happens if you lie or falsify information on the bankruptcy documents?
When you agree to go through bankruptcy, you sign documents that state there is "penalty of perjury" if you lie on those documents. False information can lead to your case being dismissed and could lead to fraud or perjury charges through the court.
Should you file for Chapter 7 bankruptcy?
If you have few assets, low or no income and have no way to pay back the debts that you owe, you're in a good position to pursue a Chapter 7 bankruptcy. It will have an impact on your credit, but there is also the likelihood that your credit has already been damaged by not being able to afford your monthly payments on your debts. Your attorney will help you put together your bankruptcy case and make sure you follow all the requirements, so that you can have those excessive debts discharged and start fresh with a positive financial outlook.