Chapter 7 Bankruptcy

The focus of a Chapter 7 bankruptcy is the discharge of debts. Most individuals file bankruptcy to discharge credit card debts and avoid lawsuits or wage garnishments associated with having credit card debt they cannot repay.   Recently, there has been a surge in the number of individuals who file a bankruptcy to avoid collection lawsuits or income tax issues associated with the foreclosure of a home.

In a typical Chapter 7, the individual has no non-exempt assets or equity, and therefore the individual can have all of his or her debts discharged and lose no assets in the process.   It is really a remarkable opportunity offered by the United States’ bankruptcy laws, which allow the elimination of one’s financial obligations with no threat of future liability or anything like debtor’s prison; a potential fear of debtors in other parts of the world.     

While a Chapter 7 bankruptcy can allow an individual to get a fresh financial start by eliminating debt, not everyone can qualify for a Chapter 7.  Qualification is based on one’s gross income received from all sources, during the six months prior to the bankruptcy filing.  Every sources of income over that time period must be included in the calculation, including income from investments, rental property, and child support or from other members of the household.  A current monthly income number is arrived at which indicates whether the individual will qualify for a Chapter 7 bankruptcy.  The attorney will perform additional calculations in some cases in order to make this determination.         

If the individual qualifies for a Chapter 7 bankruptcy, many if not all of their debts can be eliminated.  We are often asked the question of whether credit card debts or medical debts can be wiped out, while at the same time allowing an individual to keep their home and cars.    

If your home does not have equity and you are current on your payments, the general rule is that you will be able to keep your home in a Chapter 7 bankruptcy. If your home does have equity, a skilled bankruptcy attorney can help you determine how much of that equity can be protected from your creditors.

If you are in the process of a home loan modification or involved in trial loan modification, there are issues to consider before pursing a bankruptcy.  If you are considering a short sale or foreclosure and you also have credit card debt that you cannot pay, consulting with a bankruptcy attorney before making decisions regarding your home is recommended.     

Cars too can be protected from your creditors in a Chapter 7 bankruptcy, depending on how much equity is involved.  However, if you owe money on your car, it is important to note that changes in the bankruptcy laws now make it possible for the car lender to repossess your car, even if you remain current on your payments!  A competent bankruptcy attorney can advise you on step you can take to avoid repossession.    
    
We always offer free consultations without obligation. The bankruptcy laws are complicated. It is to your benefit to seek competent advice before making decisions which impact your financial future.           


[This information does not constitute legal advice, does not constitute any promise or guarantee, and should not be used as a substitute for consultation with a professional attorney.]