There is a great deal of misinformation circulated about bankruptcy in the American consciousness. For many Connecticut residents, the prospect of declaring Chapter 7 bankruptcy can be daunting or even frightening. It can be very helpful for individuals struggling with debt to understand how the process actually works, in order to determine whether it is the right financial move for them.
In order to file for Chapter 7, certain criteria must be met. First, the individual or business must not be eligible for a Chapter 13 filing, which involves debt restructuring and allows the debtor to pay back creditors without liquidating assets. If the debtor’s income is above the median income in his or her state of residence, a means test is applied to determine whether Chapter 7 is the more viable solution. In any case, a debtor must attend credit counseling prior to filing for bankruptcy.
A number of documents are required to file for Chapter 7 bankruptcy, including a statement of financial affairs, schedule of assets and liabilities, schedule of income and expenditures, and several others. Tax returns are also required. A trustee is appointed after the bankruptcy is filed, who will work with the debtor to determine if any of his or her debts can be discharged (or forgiven by the court). It is important to understand what kinds of debts can and cannot be discharged by the court.
In fact, it is important to understand every step of the Chapter 7 process before filing. Here in Connecticut, many resources exist to aid residents struggling with debt repayment. The support of a dedicated bankruptcy attorney can help reduce the risk of paperwork error and provide a broader picture of what bankruptcy means in the long term. This, in turn, can help return the debtor to financial health.