Chapter 7 Bankruptcy
Eliminate your debts in a matter of months.
What Is Chapter 7 Bankruptcy?
A Chapter 7 bankruptcy offers a quick way to eliminate most debts and move on to a fresh start. If you are overburdened by unsecured debt, Chapter 7 will help you eliminate most debts, including credit card bills, medical bills, past due utilities, and even some back taxes. Within a matter of months, these debts will be discharged and you will be on your way to rebuilding your financial life.
How Chapter 7 Bankruptcy Works:
Preparing your case: I will review your income & expenses, assets, and debts, and develop a clear plan of action.
- Your Income & Expenses: Unless your debts are business-related, in order to file for Chapter 7 relief, you will need to qualify under the median income test. The first step is to determine if your 6-month average household income is below the median income for your household size. If it is, no further means testing is required. If your household income is above the median, you still may qualify after adjusting for certain expenses. The basic principle is to determine if you have enough disposable income to repay a meaningful amount to your creditors. If you CAN repay a meaningful amount to your creditors, you may end up filing Chapter 13 bankruptcy instead.
- Your Assets: You may have heard that Chapter 7 is a “liquidation” bankruptcy where you give up all of your assets. However, most people that file Chapter 7 will be able to keep everything that they own. This is because you are entitled to keep exempt property. Generally, if you don’t have much equity in your home or car, and don’t have many luxury items, most of your assets can be exempted. You can find more detailed information on all the categories and dollar amounts of your exemptions here.
- Your Debts: I will review your debts to see how much you owe, and whether your debts are secured or unsecured. Secured debt is a debt for which you pledged collateral to guarantee a loan. This is typically a vehicle or home loan. Typical unsecured debts include credit card debt, medical bills, income taxes, unpaid utilities, and past due rent.
Filing Your Case & the Automatic Stay:
Once I have gathered all of the information, I will prepare your bankruptcy petition, review it with you, and then file it with the court. Once your case is filed, the Automatic Stay is in effect, which is a temporary stop of collection efforts by your creditors. This means an end to harassing creditor calls and collection lawsuits!
The Discharge:
Think of the discharge in bankruptcy as the permanent counterpart to the automatic stay. When your discharge is granted, it is a permanent stop to collection of your debts. Once you are granted a discharge, which is usually within a few months of filing for relief, you will no longer be burdened with payments to unsecured creditors!
