Chapter 7 Bankruptcy

Chapter 7 BankruptcyWhy should you file bankruptcy?

Filing for bankruptcy is your chance to start fresh, stop creditor calls and harassment. Chapter 7 bankruptcy is a way to achieve this goal in approximately three months. Most clients are able to retain their personal property, vehicles and retirement assets. If a debtor owns property that exceeds the amount of allowable exemptions, they have the ability to pay extra to keep those assets or the non-exempt assets are sold and the proceeds are distributed to the creditors. The debtor then begins with a fresh start toward rebuilding their credit.

Is filing a Chapter 7 the best solution?

A Chapter 7 is the fastest way to relief as the average case last only approximately three months. The majority of bankruptcies filed are a Chapter 7. A Chapter 7 does not have a debt repayment plan that you have to maintain.

Ordinarily, most (if not all) debts would be discharged within three months of filing a bankruptcy petition. This includes credit card debt, medical bills, signature loans, deficiency balances for repossessions, short sales, deed in lieu and foreclosures of homes. It would not include debt such as student loans, child support or alimony, court fines or penalties, damages caused by driving under the influence and other exceptions.

Can I keep my car when I file Chapter 7?

Yes. A debtor is given an opportunity to keep their vehicle in a Chapter 7 by signing a reaffirmation agreement (which is basically an agreement to pay under the same or similar terms of the original purchase agreement for the vehicle).

Can I keep my house when I file a Chapter 7?

A debtor may continue to keep their home in a Chapter 7 if they are either current in the mortgage or otherwise reach a forbearance or modification agreement with the mortgage company. If a debtor is behind in their mortgage payments, and have been unable to reach a modification, but still want to keep the home, a Chapter 13 plan will provide them up to five years to catch up on mortgage payments. In 2010, the bankruptcy court also begin to allow mediations in Chapter 13 cases to try and reach a modification. If a modification is successful in a Chapter 13, then the debtor may convert to a Chapter 7. As of May 2012, debtors are now allowed in a Chapter 7 to strip a second mortgage or HELOC provided the house is worth less than what you owe on the first mortgage.

Am I eligible for a Chapter 7?

A bankruptcy attorney will collect information from your regarding your monthly income and expenses to determine if you are eligible for Chapter 7 relief. Provided you have no or very little disposable income after paying your living expenses each month, you should qualify for a Chapter 7. Your bankruptcy attorney will complete a budget for you and the Means Test imposed by Congress by the bankruptcy amendments in 2005. The Means Test limits the amount of certain expenses to IRS guidelines for your family size. While there are Means Test forms available online to see if you qualify, many clients do not know how to fill them out correctly and as a result the amount of disposable income is inaccurate. Also a bankruptcy attorney may be able to make suggestions of how you can qualify for a Chapter 7 under the Means Test based upon case law or local custom.

Any person who has been granted a Chapter 7 discharge within the past eight years cannot file for a Chapter 7 bankruptcy, but they can file a Chapter 13 within four years.

How do I file for a Chapter 7 Bankruptcy?

Our law office offers free consultations by phone or in person for clients who want to consider their financial options. You will be asked about your income, assets and debts at the consultation and advised as to various options available. If you elect to retain our law firm, you would then be provided with a new client packet to begin providing the necessary information for filing. You do not have to pay all of the attorney's fees and costs at one time, most of our clients spread these out over several months. Our one rule is that you have to pay in full before we can file your case because the court rules prevent us from accepting any payments from you after the filing of your Chapter 7 case. Be sure the information you provide during the consultation and thereafter is complete and correct.

After filing bankruptcy

After filing for bankruptcy, debtors often wonder when they will have good credit again. A consumer credit report stores information about bankruptcy for 10 years. However, it takes only about 18 months of paying your bills on time to re-establish a good credit rating which would prove that you can manage your finances sensibly. It is often faster to fix your credit by filing bankruptcy then to leave all the bad debt sitting on your credit report where you can still be subject to lawsuits and garnishments and have a poor debt to income ratio precluding new creditors from giving you credit.