A Chapter 7 is one of two options for individuals who have outstanding debts that can’t be paid. So who can file for Chapter 7 bankruptcy in Kentucky, and is it right for you? Here are the pros and cons.
What is a Chapter 7 Bankruptcy?
Chapter 7 Bankruptcy is a way to eliminate debt with generally no repayment to creditors. It allows an individual to completely get rid of most debt by receiving a discharge from the bankruptcy court at the completion of a 90-day process.
Advantages of Chapter 7
Some examples of debts that are typically discharged in a Chapter 7 bankruptcy include: credit cards, medical bills, personal loans, old utility bills, payday loans, prior repossession or foreclosure deficiencies, and other types of miscellaneous collections. At the end of your Chapter 7 case, the court may offer a discharge on all or some of your debt, which means you are no longer required to pay the debts that existed prior to filing your bankruptcy.
Most people who file a Chapter 7 don’t have adequate income to make monthly payments in a repayment plan. People who are on disability or who have lower incomes are most likely to file a Chapter 7.
Although Chapter 7 bankruptcy in Kentucky is referred to as a liquidation, many people that file for Chapter 7 are able to keep most, if not all, of their assets. This can happen due to two reasons. First, there are bankruptcy code exemptions available to protect their basic possessions. Second, most people that file for bankruptcy do not have significant equity in their homes or cars for their creditors to come after.
So for most clients, we are able to protect all or most of their property through the bankruptcy process, and get them out of debt.
If you’re household income is limited, a Chapter 7 might be your best option.
Disadvantages of Chapter 7
While Chapter 7 bankruptcy sounds perfect in all cases, there are disadvantages, so be sure to consider these before taking action.
The primary disadvantage of filing for a Kentucky Chapter 7 bankruptcy is that it stays on your credit report for ten years. This means that you may find it more difficult to be approved for new credit during that time. This can include having issues obtaining a mortgage, sometimes even renting a new apartment, taking out personal loans, and more.
It is also possible that if the court feels you have enough disposable income, they may transfer your bankruptcy to a Chapter 13, which does require repayment of your debt for the next three to five years.
In a small percentage of cases, your bankruptcy attorney may advise you to relinquish your home in a short sale if you’re still unable to make your mortgage payments after the other debts are eliminated.
Because of these risks, it is important to work with an experienced bankruptcy professional who can help you determine if the advantages of bankruptcy outweigh the risks for you and your family.
If you want to find out if you qualify for a Chapter 7 bankruptcy, call or text Tracy Hirsch today at (502) 435-2593. Consultations are always free, and she’s here to help!