CHAPTER 7 BANKRUPTCY
Chapter 7 generally takes about four months and can only be used once every eight years. Because Chapter 7 is a liquidation chapter, assets may be sold by the trustee to pay creditors.
Eligibility for Chapter 7 depends on meeting income guidelines and having a financial profile that fits the purpose of the chapter. There is an examination of the totality of your financial circumstances. The court reviews your income, whether you own property that could be at risk in a liquidation case, and many other factors in order to qualify.
Individuals who fall within the income limits and have few assets may qualify for Chapter 7. It is a bankruptcy option for people with income below certain thresholds who have few assets.
People who have regular wages above a certain threshold or more than minimal assets often do not fit neatly into Chapter 7’s requirements, simply because the chapter is designed for households with limited resources. Those who do not qualify for Chapter 7 may be able to file Chapter 13 bankruptcy instead.
Chapter 7 can eliminate many unsecured debts, but it does not address every type of financial issue. Some situations—such as mortgage arrears, car loan problems, or certain tax debts—are not handled within Chapter 7 and may require Chapter 13 to resolve.
Both chapters offer paths to relief, but they serve different financial situations. The right chapter depends on your income, your property, and the type of debts you have, as well as many other factors.