Effects Of Money You Expect To Receive When Filing For Chapter 7 Bankruptcy

19 March 2020
 Categories: Finance & Money, Blog

If you or the small business you own is struggling financially and are not sure what to do, you could file for Chapter 7 bankruptcy. This branch offers advantages to you over Chapter 13, and one of these is that it offers forgiveness of debt. Filing for Chapter 7 provides a way to instantly eliminate your personal and small business debts, but there is one thing to know. If you file for this branch and are expecting a lump-sum of money in the future, the court can take it. Keep reading to learn more about what this involves.

The Basic Principles of Chapter 7

If you do not understand the key principles of Chapter 7 bankruptcy, you may have difficulty learning how future money you receive can affect you. There are two main principles to know about this branch:

  1. It offers a discharge – A discharge is equivalent to debt forgiveness. If a debt qualifies, your case eliminates the debt.
  2. It may require liquidation – The second principle is that it may require selling things you own. The purpose of this is to raise cash to use for your discharged debts.

Chapter 7 uses these principles for individual filings and small business cases.

The Types of Future Payments the Court Looks for

The second principle listed is liquidation, and this means that the court can carefully review your assets and take them if necessary. When the court evaluates your assets, they look for equity in the assets. They will not seize assets that have no equity.

Not only will they view assets you currently have in your possession, though. They will also view future assets you expect to receive in the future. They look at future income tax refunds you expect, and they will likely take your next one. They also look at assets you expect to receive from inheritances, lawsuits, or lottery winnings.

How to Time Your Case Appropriately

If you plan on receiving a large amount of money in the next year, you may want to wait to file for bankruptcy. If you wait, you may not have to surrender the money to the court for your case.

By understanding this principle of Chapter, you can plan appropriately for your case. You may decide that filing now is the best option, or you might choose to wait a few months. 

To know more about filing for bankruptcy, contact a bankruptcy law company near you.