Chapter 7 Bankruptcy Overview
Are you struggling with debt? Is your debt getting in the way of you supporting your family? Is your daily life filled with stress instead of joy? At Solvent, we can provide guidance and help through the mess that debt creates. We understand that each situation requires a specific solution to reach the goals of our clients. A chapter 7 bankruptcy may be that specific solution to fix your debt problems. With 20 years of consumer bankruptcy experience, our attorneys have the experience and knowledge to guide you through your financial difficulties and begin to live life free from the burdens of debt.
What is a chapter 7 bankruptcy?
A chapter 7 bankruptcy allows a debtor to obtain a fresh start from the burdens of debt. Upon discharge, all debts that are eligible to be discharged are discharged – meaning that you do not have to pay the debts back. The legal process for filing bankruptcy is complicated and convoluted. The bankruptcy process is best navigated with the help of a skilled consumer bankruptcy attorney.
Why file a chapter 7 bankruptcy?
When you feel that you cannot move forward with life and the debt is dragging you and your loved ones down, you may be a candidate to obtain a fresh start by filing a chapter 7 bankruptcy. Reasons why you want to file a chapter 7 bankruptcy:
- Collection calls and harassment from your creditors
- You can only make the minimum payments on your credit cards
- Medical debts are stacking up
- You have been served legal papers which means you are being sued
- You are afraid of being garnished, foreclosed, evicted, or losing your vehicle
- You cannot save money to achieve a goal (e.g. buying a home)
Do not despair – there is hope by filing a chapter 7 bankruptcy. The filing of a chapter 7 bankruptcy will stop your creditors and provide you relief from your stress.
After a chapter 7 bankruptcy, what debts are gone, what debts remain?
Not all debts are created equally. The bankruptcy code categorizes debts based upon the nature of the debt. Typically, debts that can be discharged in a chapter 7 include:
- Credit card debt
- Medical bills
- Unsecured personal loans
- Payday loans
- Overpayment debts
- Past due rent
- Past due utility bills
- Income taxes that are 3 years or older
Secured debts (e.g. car loans, mortgages) are dischargeable in a chapter 7 bankruptcy; however, there are consequences to walking away from secured debts – namely you will lose the asset that is secured against the debt. As an example, if you cannot afford your car loan, you can discharge the debt but will have to turn the car over to the creditor. You will lose the car and the debt.
Debts that are not dischargeable include:
- Child support or other debt obligations imposed by a family law court
- Government fines
- Restitution
- Income taxes that came due within 3 years of filing bankruptcy
- Debts obtained via fraud
- Student loans are not dischargeable unless the debtor files an adversary proceeding against the student loan creditor and obtains a discharge through a judicial order – discharging a student loan is extremely hard to do
What assets can you keep?
One of the most important reasons why you should hire a bankruptcy attorney is to protect your assets. Bankruptcy law allows you to keep most, if not all your assets. The laws that protect your assets are called exemptions. Federal bankruptcy law and each state has a specific set of exemptions. Some states allow you to choose between federal exemptions and state exemptions while others only allow you to use one specific set of exemptions. You can protect assets up to a specific equity value. Assets that you can protect include:
- Equity in your home
- Equity in your vehicle
- Household goods
- Personal injury claims
- Worker’s comp claims
- Social Security claims and benefits
- Whole life insurance cash value
- Jewelry
- Tools of the trade
- Other assets may be exempt (depending on the state) if you can use the federal exemptions because that set of exemptions has a general “wildcard” exemption for miscellaneous assets
Do not consider this list as a substitute for legal advice from an attorney. Each situation is different and requires a thorough analysis from an experienced bankruptcy attorney.
Is there life after a chapter 7 bankruptcy?
Emphatically – YES! You will be free from the harassment and pressures of the most common debts. You will be able to live life without the stress of thinking how you are going to pay the debt. You will be able to rebuild your credit quickly and start achieving your goals.
