The holidays often leave people a little short financially, and it may take a while to get the bills back on track. For many, this splurge once a year is worth tightening the belt for a few weeks to catch up, and then it is back to a smooth-running budget.
Perhaps this does not describe your situation. If your holidays were leaner than usual and you know it will take more than a few weeks to straighten things out, you may feel a bit of a panic as you step into the new year. In fact, you may see no light at the end of the tunnel and are now looking at your options for finding debt relief. Perhaps you are wondering if you qualify for Chapter 7 bankruptcy, along with how this option may help you.
Preparing for the process
Chapter 7 is a major step to take, and there may be other less drastic alternatives, which a skilled attorney can review with you. If you have explored these options to no avail, you must first determine if your situation qualifies for Chapter 7, also called liquidation bankruptcy. To qualify, you must pass the means test, which simply determines if your disposable income is insufficient to pay your debts. If you pass the means test, you may begin preparing for the filing process by gathering this information:
- Bank statements from all your accounts
- Pay stubs
- Credit card statements
- Loan documents
- Information about your spending
- Details about your assets, including your home and vehicle
This information will assist you in truthfully completing the bankruptcy petition, which you will then submit to the bankruptcy court in Santa Rosa along with the filing fee.
What happens next?
When you file for bankruptcy, the court issues an automatic stay, which means it notifies your creditors to cease any efforts to collect from you, including garnishing wages, repossessing your vehicle or foreclosing on your home. The court will also assign a trustee to your case who will invite your creditors to meet with you about your request for bankruptcy.
Following this meeting, which your creditors may or may not attend, the trustee of your case has the authority to take possession of and sell any property the law does not exempt. Your attorney can assist you in identifying exempt assets. The trustee will distribute the money obtained through the sale of these assets among your creditors, if this applies to your case. Many creditors will not object to discharge the remaining balance of the debt.
This is a simplified summary of the process, but Chapter 7 has brought relief to many in desperate financial situations. An attorney can provide more information and answer your questions related to your special circumstances.