What is Chapter 7 Bankruptcy?
A Chapter 7 bankruptcy is king when it comes to wiping out unsecured debts. Ultimately, the main goal of this type of bankruptcy is to discharge your unsecured debts while protecting as many assets as possible with exemptions.
Typically, a Chapter 7 bankruptcy is what most people think of when they think of the word bankruptcy. Filing a Chapter 7 is the quickest way to wipe out a large amount of unsecured debt. Back in 2005, Congress felt that too many people were abusing the bankruptcy system and amended the bankruptcy code. With the changes to the code, it made it harder for the average debtor to qualify to file for bankruptcy. When filing Chapter 7 bankruptcy now a debtor is required to qualify by taking a means test. In a nutshell, the means test takes the average household income of an individual filing for bankruptcy then compares a median income chart for the debtor’s state where they reside. If it is close or below the average amount it will then be compared against the debtor’s monthly expenses. If the debtor doesn’t have more than $170 in expendable income left over each month after paying bills, they will qualify to file Chapter 7 bankruptcy. This is not written in stone and is an important reason why a debtor should have a bankruptcy attorney even for filing Chapter 7. Also added to all chapters of bankruptcy filing it is pre-bankruptcy credit counseling and post bankruptcy financial management course.
A Chapter 7 bankruptcy sees its power at work after filing when the automatic stay goes into place. Once the automatic stay is in place the creditors can no longer contact the debtor. This means that the creditors can no longer make those harassing and threatening phone calls. The lawsuits, foreclosure and wage garnishments will all stop. This gives the debtor some freedom no longer having to worry about answering the phone.
The main goal of Chapter 7 is the bankruptcy discharge and wiping out those debts. In order to wipe out those debts; however, you may need to give up some non-exempt property. Exemptions will need to be applied and it is important to speak with your bankruptcy attorney ahead of time to determine exactly what property is exempt and which is non-exempt before your bankruptcy petition is filed. In most cases, when a debtor is represented by a bankruptcy attorney, rarely do they lose any property. If there is property that is questionable, the bankruptcy attorney will make the debtor aware of it. At the end of the whole process, the bankruptcy discharge will be sent in the mail letting the debtor know that their debts are completely wiped out and they are on the road to becoming debt-free.
Getting answers to those tough bankruptcy questions needs to be thought of before you make a decision when it comes to your financial problems. Finding the answers to help you understand your situation more clearly can help you make an informed decision about filing bankruptcy. Take a minute to call or fill out the form to have a FREE NO OBLIGATION CONSULTATION with a bankruptcy attorney in your area.