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Is a Chapter 7 bankruptcy filing right for me?

Debt happens to many of us, and for many reasons. It could be an injury or illness that resulted in unmanageable medical debt. A job loss, something happening across the country right now, might have taken away your source of income and wiped out your savings. Divorce could end with you having high amounts of marital debt but only a small number of assets.

These are all reasons why people get behind on bills. Running past due on any debt can lead to creditor harassment in the form of near-constant phone calls and letters threatening legal consequences. You know that you need to take action to make the harassment stop, but you don’t know where to turn or what steps to take next.

A light at the end of the tunnel

This situation seems overwhelming, but there is hope. A Chapter 7 bankruptcy filing will make creditor collection action stop immediately, giving you room to breathe while you work to get your debt discharged.

Chapter 7 clears debt through the liquidation of non-exempt assets. Essentially, the bankruptcy trustee sells off non-exempt assets and uses the proceeds to pay down your debt as much as possible. Whatever is left over at the end of that process gets discharged.

Won’t I lose everything?

Many people fear Chapter 7 because they think that they will lose all their assets. This is rarely the case. Washington offers liberal exemptions that can protect such things as personal property used for work, household goods, vehicles, and more.

How long does it take?

Not everyone qualifies for Chapter 7. A filer needs to pass something known as a “means test” in order to move forward. Once that step is taken, however, things move pretty quickly.

Chapter 7 proceedings can wrap up in a number of months (which contrasts with a Chapter 13 repayment plan, which usually takes between three and five years). Discharges come for a wide range of unsecured debts, including:

  • Medical expenses
  • Credit card bills
  • Unsecured personal loans

There are some types of debts unaffected by a bankruptcy filing, however. These include:

  • Recent tax debt
  • Most student loan debt
  • Debts for personal obligations (like child support or alimony)
  • Court costs like fines
  • Criminal restitution

Bankruptcy might offer a fresh financial start, but the rules for filing are complex. It’s best to move forward with the assistance of an experienced bankruptcy attorney who can explain the legal nuances of a proceeding.