Chapter 7 bankruptcy is the most widely used form of consumer bankruptcy in the United States. Many consider Chapter 7 to be the easier and cheaper form of bankruptcy, and for the most part, they’re right.
When a person is having financial troubles, they do not usually want to file for bankruptcy protection. Unfortunately, they will look at other options that may not be in their best financial interests.
What most people don’t understand is that, when used properly, chapter 7 can relieve a debtor of his or her financial burdens and move them toward financial freedom. Ultimately, chapter 7 helps individuals and families achieve their long-term financial goals.
I wrote this blog because I find it heartbreaking to see people make decisions that can wreck their financial future. If they do so knowingly, I understand and respect their decision, but I do not want to see people unknowingly ruin their finances on the advice of a friend or a friend of a friend.
Instead, I want people to understand all their financial options, including chapter 7 bankruptcy. I want people to discuss their situations with my firm, Dellutri Law Group.
Why People File for Chapter 7 Bankruptcy
Medical bills, credit cards, and other unsecured forms of debt are the most common reasons that people file for chapter 7 bankruptcy.
Other reasons that people file for bankruptcy include:
- Job loss,
- Losing a loved one,
- Unforeseen medical issues, and
- Other life-changing events.
When someone’s life circumstances change drastically, they will usually need to deal with their unsecured debt first. People will still need to pay their mortgage or rent and their car payments, but they may put paying off a credit card on hold for several months because the consequences are not immediate.
Credit card companies may call you to remind you to make a payment. They will charge interest. They may even turn your debt over to a debt collector, but credit card companies usually take at least 3 to 6 months to hire a lawyer and file a lawsuit against you.
If you don’t pay your mortgage, rent, or car payment, on the other hand, these creditors will act quickly to protect their collateral. For this reason, most people keep paying their secured debt and turn to bankruptcy to get rid of unsecured debt that has gotten out of hand.
When Can Someone File for Chapter 7 Bankruptcy?
In order to qualify for a chapter 7 bankruptcy, a debtor must pass the means test. The means test is a congressionally created formula to determine whether an individual is eligible to file a chapter 7 bankruptcy.
The overwhelming majority of individuals who file for chapter 7 bankruptcy protection qualify under the means test. But there are those who fall into a hole in what I like to call “the Swiss cheese” of the means test.
The means test was implemented in 2005 and bankruptcy courts across the nation are still grappling with its meaning. So, if you are thinking about filing for bankruptcy protection, and you need the advice of a board-certified consumer bankruptcy attorney, please feel free to reach out to Dellutri Law Group and request a complimentary strategy session.
During that strategy session, you’ll sit with one of our expert bankruptcy attorneys, who will guide you through all your options and answer all your questions. Together, you can determine whether filing for bankruptcy protection is in your best interest and will help you achieve your financial goals.
We have been serving our clients since 1998 – call us at (800) 391-4337 so we can start serving you today.