If you were one of the many Americans struggling to pay your bills, filing for Chapter 7 bankruptcy could help you start a new financial chapter. Chapter 7 bankruptcy is also called liquidation bankruptcy. At the end of a Chapter 7 bankruptcy, most of your unsecured debt will be liquidated, and you will not be required to pay it.

Your medical bills, personal loans, and credit cards will all be liquidated at the end of the bankruptcy. Chapter 7 bankruptcy is also the most common and quickest type of bankruptcy filing. For most Americans who file for chapter 7 bankruptcy, most of their debts will be discharged or forgiven.

Qualifying for a Chapter 7 Bankruptcy

Chapter 7 bankruptcy is only available to applicants who meet the financial requirements. In the last six months, the average of your monthly income needs to be lower than the median income for the same-size household in California. If this is not true, you will need to pass the means test to qualify for a Chapter 7 bankruptcy. The means test will look at your income, debt, and your entire financial situation.

This information will be used to determine whether your disposable income is high enough to allow you to make partial payments to unsecured creditors. If you fail to pass the means test for a Chapter 7 bankruptcy, you may still be able to qualify for a Chapter 13 bankruptcy. 

Debts That Cannot be Discharged in a Chapter 7 Bankruptcy

Most of your debts will be discharged at the end of a Chapter 7 bankruptcy. In other words, you will not be required to repay most of your debts after the Chapter 7 bankruptcy is over. However, there are some types of debts that will not be discharged at the end of a Chapter 7 bankruptcy, such as:

  • Alimony
  • Child support
  • Tax liens
  • Court fees and penalties
  • Personal injury debts owed due to an accident caused by intoxication

If most or all of your debts will not be discharged in a Chapter 7 bankruptcy, filing for bankruptcy may not be for you. If most of your debts will be discharged, it’s worth looking into filing for Chapter 7 bankruptcy.

Debts will be discharged in a Chapter 7 bankruptcy:

  • Medical bills
  • Credit card debt
  • Personal loans
  • Mortgage or automobile loans 
  • Income tax debt
  • Student loans for those who can prove undue hardship
  • HOA fees if you surrender your home or condo
  • Any other type of unsecured debt

Knowing when to file for bankruptcy can be challenging. There are several warning signs for why you should consider filing for bankruptcy now. If your debts total more than your annual income, if it would take you longer than five years to pay off your debt, and your debt causes stress in your daily life, it’s probably time to file for bankruptcy.

Contact a San Diego Chapter 7 Bankruptcy Lawyer

If you are wondering whether it’s time to file for a Chapter 7 bankruptcy, the best thing you can do is discuss your case with a skilled attorney.