Tag Archive for: chapter 7

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.

As it relates to individuals considering bankruptcy the two most frequently used types of bankruptcy are Chapter 7 and Chapter 13. Chapter 7 provides for the liquidation of assets to satisfy debts owed. All nonexempt assets are gathered by a trustee and sold to pay off debts. Certain assets may be exempted from liquidation depending on federal or state laws. The individual filing for Chapter 7 bankruptcy will need to include a schedule of exempt property with their bankruptcy petition. Most Chapter 7 bankruptcies involve a situation where all the property of the individual is exempt or there are no assets. In that scenario, the trustee makes a report to the court that there are “no assets” for liquidation and no distribution is made to creditors.

Chapter 13 allows an individual to keep their property and provides a three to five year time frame to make payments. This plan is available to individuals with regular income to support the payments. The length of the term for repayment is based on the income of the individual with the longer term being reserved for individuals earning less or demonstrating other “cause” for extension. The benefit of Chapter 13 is the individual is able to retain their property, and potentially have a longer period for repayment and lower monthly payments over the term. Payments are made to a trustee and then the trustee is responsible for distribution to creditors. Both types of bankruptcy generally result in a stay meaning attempts at debt collection stop. Bankruptcy will affect your credit and will be reflected on your credit report for seven to ten years however it may be the best route to a fresh financial start if truly plagued with debt.

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