Bankruptcy is not the end of the world for you financially. In an individual capacity when a bankruptcy is filed it is called a chapter 7 bankruptcy. This type of bankruptcy is also called a ‘liquidation’ bankruptcy. This type of bankruptcy requires a stringent check of your financial condition before it is allowed. You need to pass a means test that ascertains whether you are eligible to apply for the bankruptcy.
Chapter 7 bankruptcy involves a huge financial upheaval and should not be filed for lightly. The means test is specifically designed to test whether your debts are insurmountable. There is a specified ratio that is applicable in a secured to unsecured loan ratio that needs to be fulfilled to get your application approved. The filing of the application is very critical and requires very fine detailing. It is advisable to talk to a good attorney while filing for the Chapter 7 bankruptcy.
What are the debts that are absolved in Chapter 7 bankruptcy?
The Chapter 7 bankruptcy affords the filer a discharge from many of the debts that he is reeling under, the creditors are not allowed to harass you under any circumstances. The debts that can be settled in this type of bankruptcy are credit card debts, personal loans, dentist or doctor bills and other unsecured payments of a similar nature. The bankruptcy is not known as Liquidation bankruptcy without a reason. The process may require you to sell or liquidate some assets to raise money to pay off debts.
But, do remember that there are some debts that are not settled with chapter 7 bankruptcies. If you are paying alimony, debts for death taxes, other taxes, student loans, personal injury claims for driving under influence of alcohol or drugs, these cannot be discharged under the bankruptcy filing. These are to be paid on schedule as before.