When you don't have a lot of assets and only a limited income but are drowning in debt, you might decide that you are going to file for bankruptcy. More than likely, you will qualify to file a Chapter 7. This requires that you pass the means test. Once you meet it and take care of the education requirements for filing, you will be able to get your case moving forward.
In a Chapter 7 bankruptcy, any nonexempt assets you have are liquidated by the bankruptcy trustee. You won't have to make a repayment plan, but the remaining balances on accounts will be written off when your case is discharged. You should ensure that you are being fully transparent when you fill out your paperwork.
The court needs an accurate accounting of what income and debts you have. You will also have to list any assets that you own, including real property. Your monthly expenses are also a factor in these cases. You will fill out paperwork that documents all of these so that the court has the full financial picture for your case.
You will have the benefits of the automatic stay that were discussed in a recent blog post. The bankruptcy court will alert your creditors to the filing. There will be a meeting of creditors between days 21 and 40 after the filing. The trustee will report back to the court within 10 days of that meeting with a determination of whether or not there is a presumed abuse in the case. If there is no sign of abuse, the case can move forward toward the final discharge of debts.
Before you file a Chapter 7 bankruptcy, make sure you understand how it will impact you now and in the future. Additionally, ensure you know your responsibilities and rights as you seek to have your debts legally discharged.