The majority of bankruptcies filed by individuals in the United States are Chapter 7 bankruptcies. A Chapter 7 bankruptcy is a liquidation bankruptcy. This is where the debtor will give up valuable property with the goal of paying off creditors.
In order to file for a Chapter 7 bankruptcy, you must meet specific income limitations. Assuming that you meet the requirements, there are many advantages to a Chapter 7 bankruptcy. According to FindLaw, with a Chapter 7 bankruptcy you get a complete fresh start, you can keep future income and there is no repayment plan to deal with.
What is the “fresh start?”
This is the entire goal of a Chapter 7 bankruptcy. With a successful Chapter 7 filing, you will have an entirely new start because the courts will eliminate your personal liability for certain kinds of debt.
Keep in mind that bankruptcies cannot discharge all debts. If you have liens against your property, child support payments or debts you incurred through fraudulent actions, you must still pay these back. It is also usually not possible to discharge student debt with Chapter 7 bankruptcy.
How does future income factor in?
Generally speaking, the courts will not include any income you acquire after you file for Chapter 7 in the bankruptcy process. The exception to this is if you acquire specific types of properties within 180 days of filing for Chapter 7.
This is in contrast to a Chapter 13 bankruptcy. A Chapter 13 bankruptcy involves a payment plan that you must stick to after you complete the bankruptcy filing. With Chapter 7 there is no need to do this.