Chapter 7 Bankruptcy Information
What is Chapter 7 Bankruptcy?
If you're struggling to catch up on credit cards, medical bills, payday loans and other unsecured debts, Chapter 7 bankruptcy may be an option.
Chapter 7 bankruptcy has helped millions eliminate their debts, but not everyone can file Chapter 7. In order to qualify, you must pass the Chapter 7 means test.
A bankruptcy lawyer can answer your bankruptcy questions and help you determine your Chapter 7 eligibility.
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The Chapter 7 Bankruptcy Timeline
Chapter 7 bankruptcy cases typically move relatively quickly and you may receive your discharge in just a few months.
A Chapter 7 debt discharge will generally eliminate unsecured debts like credit card debt, medical bills, most personal loans, judgments resulting from car accidents, deficiencies on repossessed vehicles, some older tax debts, payday loans, utility bills and wage garnishments.
Check out this handy Chapter 7 bankruptcy Timeline tool that can help walk you through the Chapter 7 bankruptcy process.
The Chapter 7 Means Test
Before filing for Chapter 7 bankruptcy, you'll have to qualify to file Chapter 7 bankruptcy through the Chapter 7 means test.
Although there was a lot of media hype about the Chapter 7 bankruptcy means test disqualifying people from filing for Chapter 7 bankruptcy when it was introduced in 2005, the truth is that most Chapter 7 petitioners still qualify.
In the unlikely event that you are one of those few who do not, filing bankruptcy may still be an option; this time in the form of Chapter 13 bankruptcy
The Chapter 7 means test is a two-step process which begins with a median income comparison.
Explaining this first step of the Chapter 7 bankruptcy means test in more detail, your monthly income is compared to the median income in your state for a family that is the same size as yours.
If your income is at or below the median income, you qualify for Chapter 7 bankruptcy. If your income is higher than the median income, it doesn't mean that you can't file for Chapter 7 bankruptcy, but rather triggers the second step of the Chapter 7 bankruptcy means test.
Calculating disposable income and unsecured debts is the second step of the Chapter 7 means test. Generally speaking, if your disposable income over the next five years is less than $6,000 ($100/month), you'll probably "pass" the Chapter 7 bankruptcy means test and can file Chapter 7.
If your disposable income during that five year period is greater than
$6,000 but less than $10,000, you may still be able to file for Chapter
7 bankruptcy protection, depending upon your allowed expenses
A local bankruptcy attorney can further explain how disposable income is calculated.
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Is Filing Bankruptcy Right for Me?
Typically, Chapter 7 bankruptcy has been an option for people who:
- Have no income or low income
- Have lots of credit card debt or medical bills
- Have little or no money left after paying necessary living expenses each month
- Rent or have little equity in their home
- Have few assets (or no assets) outside of furniture, clothing and other necessities
Chapter 7 bankruptcy is often referred to as liquidation bankruptcy because a bankruptcy trustee can liquidate (sell) non-exempt assets to pay part of your outstanding bills.
But the term liquidation can be misleading since most people filing Chapter 7 don't have any non-exempt assets, meaning there's no actual liquidation.
The Credit Counseling Briefing
The law requires that you receive a Credit Counseling Briefing from a certified credit counseling agency before filing bankruptcy, regardless of whether you're filing Chapter 7 or Chapter 13 bankruptcy.
The agency will explain financial management and how to do a budget analysis and will also discuss alternatives to filing bankruptcy.
Although there are some exceptions to this rule, most debtors will have to get this briefing. Failing to do so before filing may result in your bankruptcy case being dismissed.
Your Chapter 7 bankruptcy lawyer can refer you to the appropriate agency or you can purchase an approved Credit Counseling Briefing online at www.StartFreshToday.com.
The Bankruptcy Lawyer
If you decide to file Chapter 7 bankruptcy, you will first have to complete your credit counseling session and then provide all of the necessary information to your Chapter 7 bankruptcy lawyer, who will review your situation and prepare a bankruptcy petition.
You will have to list personal information, including all of your income, assets, expenses and debts on your bankruptcy petition and any related forms and schedules. You will also have to include any applicable exemptions to which you're entitled.
How important is it to disclose all of your debts when seeking to file for Chapter 7 bankruptcy? Whether failing to list certain debts is an honest mistake or a deliberate action, bankruptcy fraud is a serious offense that can result in prosecution. Bankruptcy lawyers can help prevent bankruptcy fraud.
Next, your bankruptcy attorney files the petition in local bankruptcy court, which will appoint a bankruptcy trustee to your case.
After filing bankruptcy, an "Automatic Stay" is entered in most cases to prevent creditors from taking any further action against you outside of bankruptcy court.
That means that the harassing creditor calls stop. Legal actions (like foreclosure, repossession, lawsuits and wage garnishments) can also stop.
Your Part
Be sure to follow your attorney's advice and do not attempt to conceal your property, destroy any financial records, violate any court order or make big last-minute charges on your credit cards prior to filing bankruptcy.
Please note that you may only file for Chapter 7 bankruptcy once in eight years. Understanding the Chapter 7 bankruptcy timeline is critical to making good decisions for your financial future.
Chapter 7 Bankruptcy Exemptions: Protect Property from Creditors
Exemptions protect certain property from liquidation in bankruptcy. The specifics vary from state to state.
Exemptions typically include your primary residence, tools, work equipment, vehicle, certain items of personal property and numerous other categories of property.
In most cases, exemptions will protect all of your property.
If not, your court-appointed bankruptcy trustee can liquidate your non-exempt assets to pay your creditors. However, a trustee will only liquidate in most cases if he or she can obtain enough money from a sale to make a significant payment to your creditors.
Talk to one of our sponsoring bankruptcy lawyers today about your state's exemptions.
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Reaffirming Secured Debts
Although Chapter 7 bankruptcy may help eliminate unsecured debts, secured debts are generally not separated from the assets that secure them. That means that if you want your car loan discharged, you'll have to give back the car.
However, if you want to keep your car (or another asset that serves as security for a debt) you may be able to negotiate a reaffirmation agreement with your creditors in Chapter 7 bankruptcy. By reaffirming a debt, you agree to continue making payments in exchange for the right to keep your property.
The Final Step
Before getting your bankruptcy discharge, you must complete an approved Debtor Education Course: a personal financial management course required by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.
Your bankruptcy lawyer may refer you to an approved financial management class or you can purchase an approved Debtor Education Course online at www.StartFreshToday.com.
Chapter 7 Bankruptcy Fees
If you're interested in filing for Chapter 7 bankruptcy, you will likely wonder about how much it will cost to do so if you qualify through the Chapter 7 bankruptcy means test.
View current Chapter 7 bankruptcy fees here on our site. (Note that Chapter 7 bankruptcy fees are subject to changes that will be listed on the Web site of the U.S. Bankruptcy Court).
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Chapter 7 Bankruptcy May Provide a Fresh Start
Filing bankruptcy - whether it's Chapter 7 or Chapter 13 - is a decision that shouldn't be undertaken lightly.
However, if you're in a difficult financial situation that just keeps getting worse, filing bankruptcy may be the opportunity you need to seek broad protection against creditors, regain control of your financial life and rebuild your credit after bankruptcy.
Don't live another day in financial torment. Take action and control today by talking with one of our sponsoring bankruptcy lawyers about how filing bankruptcy may be able to help with your current financial problems.
Our number is 877-349-1309 and you may also use our bankruptcy case review form.
The above synopsis of bankruptcy laws is by no means all-inclusive and is not legal advice. These laws may have changed since our last update and there may be additional laws that apply in your situation. For the latest information on these bankruptcy laws, please contact a bankruptcy lawyer in your area.
