Everything You Need to Know About Chapter 7 Bankruptcy
What is Chapter 7 Bankruptcy?
Chapter 7 Bankruptcy is the most commonly filed for bankruptcy. In this type of bankruptcy, individual debtors, including married couples but not including corporations or partnerships, are released from outstanding debts. Debtors slates are wiped clean, but are allowed to keep exempt assets.
Who Can Get It?
To determine eligibility, debtors are required to take a means test. The means test helps discern who is truly having trouble paying back their debts, and if their monthly income is less than the state’s median income for their family size. There are exceptions and qualifications that vary, including your income over the last six months or any big events that may have changed your finances significantly, so having a lawyer help you review your situation can help clear up questions you may have.
Is It Complicated?
Typically, Chapter 7 bankruptcy is a four to six month process. Before filing, however, debtors are required to attend credit counseling within 180 days before filing, and can not have had a petition dismissed within six months previous to filing.
To file, debtors have to fill out a series of forms about your finances, which are numerous and complex. This is where an attorney can be particularly helpful. Seasoned attorneys can make sure you fill things out properly, avoid common mistakes and pitfalls and are successfully discharged.
Also, it is imperative that you are completely honest in filling out these forms. To not list any property, debts, and creditors could mean that you could lose consideration for bankruptcy and that you could be under investigation by the FBI, as dishonesty about bankruptcy is a very serious crime. Also, if the court finds out that you were dishonest, they can revoke the discharge. Since bankruptcy is a public affair, it could be quite embarrassing anyway, and especially if you are found to be dishonest. How public? Well, your financial background and mistakes are viewable by the public, and the meeting of creditors you’re required to attend is done in a public room (with very few exceptions).
How Much Does It Cost?
Bankruptcy, ironically, can be an expensive process, but once you’ve filed, collectors are required to cease any actions towards you. And, while hiring a lawyer can be pricey, it is highly recommended. Your debt is much more likely to be discharged if all the paperwork and filing goes in properly and honestly, and a lawyer will see to it that everything is in order. If your solo application doesn’t work, you’re at a higher risk for dismissal, which could leave you with higher financial burden.
To ease the situation, most lawyers and courts accept payment plans. And, if you’re at less than 150% of the poverty level, the court may waive your filing fees.
Important to Remember
If you are granted bankruptcy discharge, this means that just you, the individual, are granted bankruptcy. If you’ve had someone cosign an agreement, they may still be held accountable for the debt. The debt itself is not erased, it’s just that you, personally, are not held accountable for the debt any longer.
Also, debts that are not included in dismissal include federal or state student loans, child support, alimony, and debts related to criminal conduct.
Bankruptcy will take a toll on your credit score, and for many discharged debtors, it’s common to need about two years to be back in the saddle of your finances.
If you’re thinking about filing for Chapter 7 Bankruptcy, give us a call today. We can assess your situation, help ease your stress, and figure out the best option for you to move forward with life.