Chapter 7 Bankruptcy
What is Chapter 7 bankruptcy?
Chapter 7 bankruptcy is sometimes referred to as a personal bankruptcy or a straight bankruptcy. Under Chapter 7 individuals and businesses discharge or wipe out all their unsecured debts. A discharge is a court document stating that your debts are satisfied and non-collectible. Chapter 7 is the most common type of bankruptcy filed in the United States by individuals and businesses who cannot repay their debt.
Once you file a Chapter 7 bankruptcy all collection actions by creditors must stop by court order. This includes all phone calls, collection letters, court proceedings, garnishments, vehicle repossessions, and home foreclosures.
Do I Lose Everything?
Chapter 7 is also sometimes referred to as a liquidation bankruptcy. A Chapter 7 trustee theoretically you can take your assets and sell them to pay your debts. However, our clients protect and keep all their assets (in the vast majority of cases) through exemptions provided by bankruptcy law and careful pre-bankruptcy planning. This, among other reasons, is why you need an experienced bankruptcy attorney. An inexperienced practitioner could cause you to lose some of your assets.
We will take all the time necessary to preplan your exemptions to make sure your assets are exempt from liquidation by the bankruptcy trustee.
What About My Home and Car in Chapter 7?
In Chapter 7 bankruptcy you may keep your home and your vehicles. You must, however, be current or able to quickly catch up any back payments to keep these assets. The creditor holding the lien on your vehicle or mortgage will send us a reaffirmation agreement for you to sign which will deem the debt non discharged in the bankruptcy. Your payments will continue as before the bankruptcy. This reaffirmation agreement also ensures that your creditor will continue to report your payment history to the credit reporting agencies, thus rebuilding your credit after your filing.
How Long Does Chapter 7 Bankruptcy Take?
A typical Chapter 7 bankruptcy lasts about three to six months from the day you see us until you receive your discharge. Depending upon how quickly you get the information we need to file your case, it can be filed and your 341 meeting concluded in about six to seven weeks. Once you have your 341 meeting, in most cases, it’s just a waiting period before your debts are officially discharged. In the meantime, you proceed with your fresh start.
What is The Means Test
To qualify for a Chapter 7 bankruptcy, individuals must pass a “means test”, which compares your income to the median income of people in Ohio. If your income is too high, based upon your total household income, and number of dependents, you might have to file Chapter 13 instead. If your debts are primarily business debts, the means test may not apply to you.
Debts Typically Discharged
Credit cards, medical bills, personal loans, utility bills, payday loans, bank charges, the balance on a vehicle or real estate you surrender to the creditors through your case, repossession balances, and some older tax debt under certain circumstances.
Debts Not Discharged
Most student loans, (unless we can prove undue hardship), child support and alimony, most taxes (with exceptions), fines and penalties owed to the government, (although we can get a holder taken off your driver’s license through a Chapter 7), debts from fraud, embezzlement, malicious injury, or excessive gambling.
Pros of Chapter 7 Bankruptcy
Quick relief from debt. Stops collection activity immediately. An almost immediate fresh financial start. No repayment plan required.
Cons of Chapter 7 Bankruptcy
Must be current on home and vehicles to keep them, doesn’t necessarily discharge all debt, can only file once in eight years, cannot catch up seriously delinquent house and car payments through the case.