Considering Chapter 7?

How Can Chapter 7 Bankruptcy Help Me?

Chapter 7 bankruptcy is often referred to as liquidation because a bankruptcy trustee can liquidate (convert to cash) your non-exempt assets to pay part of the your outstanding bills. The term liquidation is rather misleading, though, since most people who file for Chapter 7 bankruptcy do not have any non-exempt assets, and thus there is no actual liquidation.

Chapter 7 Bankruptcy Timeline: How Long Do Chapter 7 Bankruptcy Cases Take?

Chapter 7 bankruptcy cases move relatively quickly, and you may receive your discharge in just a few months. A discharge will 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, and garnishments. Certain debts are classified “non-dischargeable debts” and cannot be discharged, or can only be discharged under very specific circumstances. These include child support, most student loans, and many tax debts.

What is the Chapter 7 Bankruptcy Means Test?

Before filing for Chapter 7 bankruptcy, you will have to qualify through a 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 more than 96% of potential Chapter 7 petitioners still qualify.

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. If your disposable income over the next five years is less than $6,000 ($100/month), you “pass” the Chapter 7 bankruptcy means test and can thus file for 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.

Chapter 7 bankruptcy may be the right option if you:

• Have no income or low income
• Have little or no money left after paying your necessary living expenses each month
• Rent
• Have few assets (or no assets) outside your furniture, clothing and other necessities.

Contact the Sommers Law Group for a Bankruptcy Consultation.

www.sommerslaw.com 

ssommers@sommerslaw.com

(415) 839-8569 

 

Before Filing your Chapter 7 Bankruptcy Case, You Must Receive a Briefing from a Credit Counseling Agency

The law requires that you receive a Credit Counseling Briefing from a certified credit counseling agency before you may file a Chapter 7 bankruptcy petition. The agency will explain financial management and how to do a budget analysis, and will also discuss alternatives to bankruptcy. While there are some hardship exceptions to this rule, most debtors will have to get this briefing, and failing to do so before filing may result in your case being DISMISSED. Your Chapter 7 bankruptcy lawyer may refer you to the appropriate agency, or you can purchase an approved Credit Counseling Briefing online.

Get Protection from Your Creditors when You File for Bankruptcy

A fresh financial start may be in sight following these steps. You will first have to complete your credit counseling session and then provide all of the necessary information to your attorney, 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 or not failing to list certain debts is an honest mistake or a deliberate action, bankruptcy fraud is a serious offense that can be prosecuted.

From here, your attorney files the petition in local bankruptcy court, which will appoint a bankruptcy trustee to your case. In most cases, an “Automatic Stay” is entered to prevent creditors from taking any further action against you outside of bankruptcy court.

You Have to Do Your Part to Get Your Bankruptcy Discharge

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 enormous, last-minute charges on your credit cards. 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 Your 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.

Keep Your Car – and Other Assets – by Reaffirming Secured Debts

While 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 attorney may refer you to an approved financial management class, or you can purchase an approved Debtor Education Course online.

Chapter 7 Bankruptcy Fees: What are the Typical Costs of Filing for Chapter 7 Bankruptcy?

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. (Note that Chapter 7 bankruptcy fees are subject to changes that will be listed on the website of the U.S. Bankruptcy Court).

Chapter 7 Bankruptcy May Provide the Fresh Start You Need

Filing for Chapter 7 bankruptcy is a tough decision that shouldn’t be undertaken lightly. However, if you’re in a difficult financial situation that just keeps getting worse, it may be the opportunity you need to seek broad protection against creditors, regain control of your financial life, and rebuild your credit after bankruptcy with the help of friendly lenders.

Don’t live another day in financial torment. Take action and control today by calling the Sommers Law Group! Our number is (415) 839-8569.