Is Chapter 7 Bankruptcy the answer?

Well, it depends on what question you are asking. Chapter 7 is designed to give a person a new start. It is designed for people who have consumer debts, credit cards and medical debt. However you must attend credit counseling before you are able to file to see if there is any other kind of debt consolidation program that may help. You are also requried to go to Debt Education Counseling after the bankruptcy is discharged to make sure you don’t get yourself back into the same predicament.

Bankruptcy Chapter 7 can be the answer, if you qualify. You have to pass a test. Not like a test at school, but the “means” test. The “means” test has two parts. First, it looks at your annual income to see if it is below the state median income. If you are below, you pass the first part of the test. The second part of the test looks at your regular monthly expenses versus your income to see if you have any disposable income at the end of the month to give to the creditors to pay them back. If at the end of the month, you have money left over, then you may be a candidate for a Chapter 13 repayment plan. If you have very little at the end of the month left over, you can qualify for a Chapter 7 discharge.

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Chapter 7 is the answer if you are trying to protect assets with low value. Can I protect my home in a Chapter 7 bankruptcy? This depends on the amount of equity in the home and whether you can keep current with your payments. When you file a bankruptcy, the trustee has the right to sell items to pay off the creditors. However you are also given some exemptions which is some property that you can keep. If the house has very little equity you would probably be able to reaffirm the mortgage debt and keep the home. If you have significant equity in the home it becomes harder to keep it. Deciding what exemptions apply whether Federal or State becomes very difficult and an attorney can be very helpful in trying to protect as much as you have while still discharging the debts you cannot pay.

Bottomline you need to have very little income left over at the end of the month and assets with very little value in order to obtain a Chapter 7 bankruptcy. If you would like to know if you are a good candidate, make an appointment to talk to one of our attorneys.