If you’re struggling with debt, Chapter 7 bankruptcy may seem like an attractive option for relief. This form of bankruptcy, also known as “liquidation bankruptcy,” allows individuals to discharge most unsecured debts and gain a fresh financial start. However, it’s not suitable for everyone, and it’s important to understand how it works before making a decision.
At Lentz Law, PC, LLO, our experienced bankruptcy attorneys in Lincoln, NE, help clients throughout Nebraska, including Omaha, navigate Chapter 7 bankruptcy. Below, we’ll explore whether Chapter 7 may be the right choice for you.
What Is Chapter 7 Bankruptcy?
Chapter 7 bankruptcy allows individuals to eliminate most unsecured debts, such as credit card debt, medical bills, and personal loans. In exchange, some of your assets may be sold, or “liquidated,” to pay off creditors. The process is relatively fast, with most cases completed in about 4 to 6 months.
However, not everyone qualifies for Chapter 7. To determine eligibility, individuals must pass the means test, which compares their income to the state median. If your income is too high, you may need to explore other options, such as Chapter 13 bankruptcy.
Is Chapter 7 Bankruptcy Right for You?
Choosing Chapter 7 bankruptcy is a personal decision that should be made based on your unique financial situation. Consider the following factors when deciding if Chapter 7 is the right option:
Your Debt Type: Chapter 7 is ideal for discharging unsecured debts, including credit card balances and medical bills. However, it won’t eliminate secured debts, such as a mortgage or car loan, unless you are willing to surrender the property.
Your Assets: If you have significant assets that are not exempt under Nebraska law, they could be sold to pay off creditors. However, many individuals can keep essential property, such as their home, car, and retirement accounts, through exemptions.
Your Income: If your income falls below the state median, you’ll likely qualify for Chapter 7. If your income exceeds the threshold, you may need to file for Chapter 13 bankruptcy instead, which involves repaying debts over some time.
Desire for a Fresh Start: Chapter 7 bankruptcy offers a fast way to get out of under-crushing debt and start fresh. It can relieve financial stress and give you a second chance, but it will also stay on your credit report for up to 10 years.
The Benefits of Chapter 7 Bankruptcy
There are several benefits to filing for Chapter 7 bankruptcy, including:
- Debt Discharge: Most unsecured debts are eliminated, giving you a fresh start.
- Automatic Stay: Once you file, creditors must stop all collection efforts, including calls, wage garnishments, and lawsuits.
- Quick Process: Unlike Chapter 13, which can take years to complete, Chapter 7 typically resolves in a matter of months.
When to Consider Alternatives
Chapter 7 is not always the best solution for everyone. You may want to consider alternatives, such as Chapter 13 bankruptcy or a debt consolidation plan, if:
- You have a significant amount of secured debt.
- You wish to keep non-exempt property that could be liquidated.
- You have disposable income and could potentially repay some debts.
Get Expert Bankruptcy Guidance – Start Your Debt-Free Journey Today!
At Lentz Law, PC, LLO, we understand the financial and emotional burden of overwhelming debt. Our Lincoln bankruptcy attorneys will work with you to assess your situation and determine if Chapter 7 is right for you. Contact us today at (402) 526-5540 to schedule a consultation and take the first step toward financial freedom.