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Determining the value of Chapter 7 bankruptcy

In modern American life, debt is an unavoidable reality. Many Kentucky households carry an average of thousands of dollars in different types of debt, most specifically credit card debt that can quickly become challenging if not impossible to surmount. Thankfully, there are a variety of options available to manage that debt, including Chapter 7 bankruptcy. However, it is important for an individual or family considering this kind of debt relief to understand what it entails. 

In general, Chapter 7 bankruptcy (also called "liquidation bankruptcy") involves eliminating unsecured liabilities like credit card debt, medical bills and personal loans. There are several ways this can take place, but in all cases, a bankruptcy trustee is assigned to supervise the bankruptcy process. This kind of bankruptcy is generally used by individuals who have insufficient disposable income -- or an insufficient rate of pay -- to pay down existing debt. A means test is employed to determine eligibility for Chapter 7.

In some cases, unsecured debt can be forgiven by a bankruptcy court. In others, assets could be liquidated to pay down debts, including the filer's home and/or motor vehicle. It is important to note that some assets of this type could be considered exempt from liquidation if, for example, they are worth below a given dollar amount. These issues are handled on a case-by-case basis according to relevant state and federal laws.

It is easy to think of Chapter 7 bankruptcy as a negative financial outcome, but the opposite is actually true. For Kentucky families and individuals laboring under excessive debt, Chapter 7 paves the way to financial freedom by forgiving outstanding debts, utilizing existing assets to pay off others and ultimately bringing financial stability to the filer/s. The peace of mind that comes with being debt-free cannot be quantified, and seeking the support of a dedicated bankruptcy attorney in examining available options for debt reduction is usually a worthwhile endeavor.

Source:, "Taking the Bankruptcy Plunge: Which Type of Filing Is Right for You", Nov. 20, 2017

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Law Office of Ginger C. Cord, PSC
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