Chapter 7 bankruptcy may be a good option for you if you do not have enough money to pay off your debts. In theory, the idea behind Chapter 7 bankruptcy is the liquidation of your assets, i.e., selling them to pay off your debts. However, there are exemptions for certain types of property, especially the essentials that you need to continue living and working. It is illegal to liquidate exempt property, and if enough of your property is exempt, you may end up not having to sell anything at all.
According to Experian, filing for Chapter 7 bankruptcy is a process with multiple steps that you have to complete.
There are several eligibility requirements that you have to meet to qualify for Chapter 7 bankruptcy. For example, while it is possible to file for bankruptcy more than once if necessary, you have to wait at least six years after filing Chapter 13 and eight years after filing Chapter 7 before you can make a new Chapter 7 filing.
You also have to pass a means test to show that you meet income requirements. If you do not pass the means test to qualify for Chapter 7, you may be eligible for Chapter 13.
Another eligibility requirement for filing for bankruptcy is to complete a credit counseling course from an approved agency. With some exceptions, you must complete an individual or group course from an accredited agency before you can file. Filing has to take place within 180 days of the course.
To file for bankruptcy, you have to fill out forms listing all your property and whether or not it is exempt. You must provide all your financial information, describe your income and list your creditors. When you have completed and corrected the forms, you file them with the court.
One of the final steps in a Chapter 7 bankruptcy is the creditor meeting. You must attend, and the trustee who is overseeing your case will be there. Your creditors have the option to attend, but their presence is not a requirement.
The meeting is an opportunity for your trustees and creditors to ask you questions about your situation. It usually does not take much time.