Chapter 7 Bankruptcy
Is filing a Chapter 7 bankruptcy right for you?
We'll review your situation and contact you to schedule a free consultation with one of our Chapter 7 bankruptcy attorneys who will explain your legal rights and detail why Chapter 7 bankruptcy may be the right option for you.
What is Chapter 7 bankruptcy?
Chapter 7, or “liquidation”, bankruptcy contemplates an orderly, court-supervised procedure by which a trustee takes over the assets of the debtor’s estate, reduces them to cash, and makes distributions to creditors, subject to the debtor’s right to retain certain exempt property and the rights of secured creditors. Fortunately for debtors, exemption laws are very generous, providing for protection of most property, including the Debtor’s home, furnishings, automobile, jewelry, bank accounts, and retirement funds.
Since there is usually little or no nonexempt property in most chapter 7 cases, there may not be an actual liquidation of the debtor’s assets. These cases are called “no-asset cases.” A creditor holding an unsecured claim will get a distribution from the bankruptcy estate only if the case is an asset case and the creditor files a proof of claim with the bankruptcy court.
In most Chapter 7 cases, if the debtor is an individual, he or she receives a discharge that releases him or her from personal liability for certain dischargeable debts. The debtor normally receives a discharge just a few months after the bankruptcy petition is filed.
What do you mean by a discharge?
A discharge is the judicial order from the bankruptcy court that eliminates the dischargeable debts of the Debtor.
What types of debts ARE dischargeable under Chapter 7?
A Chapter 7 bankruptcy discharges most debts, except for those which are specifically exempt under the Federal bankruptcy code. Common examples of dischargeable debts are credit card debts, medical bills, personal loans, legal judgments, loan deficiencies stemming from foreclosures and vehicle repossessions, and wage garnishments.
What types of debts ARE NOT dischargeable under Chapter 7?
Debts for alimony or child support
Debts for educational benefits and student loans
Debts not listed on the debtor's Chapter 7 forms
Taxes due that are less than three years old
Debts that occurred under false pretenses or fraud
Debts for embezzlement or larceny
Debts for intentional injury to the person or property of another
Debts for certain fines or penalties
Debts for personal injury or death caused by the debtor's operation of a motor vehicle while intoxicated
What is “unsecured debt”?
Unsecured debt is any debt that you owe that is not secured by collateral such as a home or an automobile.
Can I file a Chapter 7 and still keep my house?
Yes. You can keep your house if you are current with your mortgage payments, and have sufficient federal or state exemptions available to protect your equity. We can help you protect your house to the full extent of the law.
Can I still file a Chapter 7 after recent amendments to the bankruptcy laws?
Probably. In October of 2005, Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. This law created, among other things, a “means test” which was designed to limit abusive bankruptcy filings and to prohibit Debtors with higher incomes from filing a Chapter 7 bankruptcy. Under the “means test,” if a debtor’s gross income exceeds the median income established for the Debtor’s state, the Debtor may not be eligible for Chapter 7 relief. The common misconception is that this Act prevents most people from filing a Chapter 7 bankruptcy. The fact is, however, that more than 95% of Debtors still qualify for a Chapter 7 bankruptcy filing.
Chapter 7 Bankruptcy Eligibility
In addition to satisfying the “means test” mentioned above, in order to be eligible to file, you must take an approved Credit Counseling Course within the 180-day period immediate preceding your filing. You will receive a signed certificate from your approved credit counseling agency that is commonly referred to as your “ticket in.”
You must also take an approved Financial Management Course after filing, in order to obtain your discharge. You will receive a signed certificate from your approved credit counseling agency that is commonly referred to as your “ticket out.”
We can refer you to a credit counseling agency approved by the U.S. Trustee’s Office to provide these courses. In most cases, the courses can be taken from the convenience of your home or office over the telephone and Internet.
How Long Does a Chapter 7 Bankruptcy Case Take?
In most Chapter 7 bankruptcy cases, you may receive your discharge in approximately four months.
Will I Have To Go To Court?
Probably not. In most cases, you only have to go to a "meeting of creditors," conducted by the bankruptcy trustee assigned to your case, to answer questions from the bankruptcy trustee and any creditor who chooses to attend. Generally, creditors will not bother to show up.
If your bankruptcy filing is properly prepared and filed, you can expect your meeting of creditors to conclude no more than 5-10 minutes after you are sworn in by the trustee.
If your bankruptcy filing is not properly prepared and filed, a creditor shows up and objects to you being granted a discharge, or some other complication arises, your meeting of creditors can be lengthy and uncomfortable for everyone involved, and you may end up before a judge at a court hearing.
Hiring an experienced bankruptcy lawyer will minimize the chance you will encounter any complications with your bankruptcy, including your meeting of creditors.