What is a Chapter 7 bankruptcy?
A Chapter 7 bankruptcy is the most common bankruptcy used by individuals. Chapter 7 involved the complete liquidation of a debtor’s property to pay creditors and wipe out remaining debts, giving you a fresh start. It is important to know that filing bankruptcy will affect your credit; however, if you are considering filing bankruptcy, it is likely that your credit has already suffered.
In a Chapter 7 bankruptcy, many types of unsecured debt may be discharged, or wiped out. Unsecured debt is debt that you did not have to put up collateral, such as credit cards, medical bills, personal loans, and certain judgments. Secured debts, such as home mortgages and car loans, are also dischargeable as long as the debts are not reaffirmed and the property is returned to the bank.
It is important to note that you may not qualify to file a Chapter 7 bankruptcy. First, your income is compared to the median income of the state. If you make more than the median, then the “means test” will be applied. The means test looks at the presumed expenses compared to your average income. Depending on the amount of money left over, you will either qualify for a Chapter 7 or a Chapter 13 bankruptcy. Essentially, if you have the means to pay some or all of your debt, you will not qualify for a Chapter 7. You will be required to file a Chapter 13 and provide for payment of some or all of your debt.
What to expect
Before filing the bankruptcy petition, you must complete a credit counseling course with an agency approved by the United States Trustee and complete a debtor education course. You will also be given a packet to complete from our office where you will list all of your assets (i.e., income and things of value) and liabilities (i.e., debts). This will help your attorney complete the means test, your petition, and will ensure that nothing is forgotten in the process.
Once the bankruptcy petition is complete, you will return to the office to review the petition to make sure that there is nothing missing or entered incorrectly. Once you have reviewed and approved the petition, the attorney will file it with the bankruptcy court. You will be given a date to appear before the trustee where you will be asked questions about your petition and make sure that the information is correct. The trustee may confirm the plan on this date or ask for more information and set another date for confirmation.
It is important to know that after you receive your discharge, you will not be able to get another discharge again until the waiting period of eight years is over. If you find yourself in this situation, call for your free consultation to see what other options may be available.
NOTICE: We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.