When filing bankruptcy, you can choose Chapter 7 Bankruptcy or Chapter 13 Bankruptcy. However, this article will focus on Chapter 7 bankruptcy, also known as liquidation or straight bankruptcy. 

What Is Chapter 7 Bankruptcy?

Chapter 7 bankruptcy is popularly known as liquidation bankruptcy because it eliminates all your unsecured debts. These debts can include medical bills, credit card debt, and personal loans. 

Most people prefer liquidation bankruptcy because it is quick and straightforward. However, Chapter 7 bankruptcy law requires you to pass a "means test" to qualify. The test will help examine your financial records to get a clear picture of your disposable income. If it is below the median income for your state, then you may qualify.

What Are The Qualifications of Chapter 7 Bankruptcy?

Here is a list of requirements you must meet to file for straight bankruptcy:

• You haven't filed for Chapter 13 Bankruptcy in the last six years.
• You haven't filed for Liquidation or Straight bankruptcy during the previous eight years.
• You have completed a pre-bankruptcy credit counseling course from an approved agency within the last six months before filing.
• You have passed a means test, or your monthly income in the previous six months is less than your state's median income.

If you are not eligible to file, you can still try after 181 days. Also, a court can dismiss your case despite being eligible. This mostly happens when the court determines that you are filing for bankruptcy to defraud your creditors.

What Kind of Debts Are Discharged?

As mentioned earlier, Chapter 7 bankruptcy will only discharge most of your unsecured debts. So, anything to do with credit card debts, unsecured personal loans, income tax debt, and medical bills will be forgiven. 

However, liquidation bankruptcy does not discharge any of these debts:

• Student loans
• Child support
• Homeowners association fees
• Court fees
• Debts that are not included in your filing
• Some tax debt
• Personal injury debts

Although most credit card debts and unsecured loans can be discharged, creditors can still object. And if they are successful, the court will require you to repay the balance. Automobile and mortgage loans can still be discharged if you can no longer pay. However, the creditor has the right to repossess the asset or foreclose it. 

You should always consult with a Chapter 7 bankruptcy attorney before proceeding with your decision. Your attorney should provide advice and help you move forward with the process. For more information, contact a bankruptcy lawyer in your area.