As we’ve previously covered in our chapter 7 bankruptcy blog series, determining chapter 7 eligibility can be complicated in itself, as can properly balancing the benefits and drawbacks unique to your circumstances. Advice from trusted, experienced legal counsel can help you smoothly navigate these obstacles and ensure you get the relief you deserve as quickly as possible.

Once you have made these crucial pre-filing decisions, Savage Villoch Law can also assist you through the process of filing your Chapter 7 Bankruptcy petition. This petition will be filed in your local bankruptcy court and consists of several Official Bankruptcy Forms which detail information such as your current assets and liabilities, a record of your current income and expenditures, a statement of your financial affairs, and any open contracts or unexpired leases.

As a consumer debtor, you’ll also need to provide the court with a record of recent credit counseling, along with the debt repayment plan develop therein. In addition, the court will need a detailed list of all of your current creditors, and a list of all of the property you own.

The filing fees for a chapter 7 bankruptcy petition include $245 to file the case, a $75 administrative fee, and a $15 surcharge for your assigned case trustee. That brings the total cost of filing to $335, which is generally due to the clerk at the time of filing.

Once your petition is officially filed with the bankruptcy court, a trustee will be assigned to your case. This case trustee will be an impartial third party who administers your case through the process and facilitates the liquidation of any of your nonexempt property and assets. In the event that all of your property is exempt, as is typical of chapter 7 cases, the case trustee will simply file a “no asset” report, and none of your assets will be taken from you and sold to pay your debts.

Within 21 and 40 days of filing, your case trustee will hold a creditor meeting, during which you’ll be put under oath and asked questions regarding your financial standing and property interests. This meeting helps the court determine whether your petition can properly be filed under chapter 7, similar to the chapter 7 means test.

So long as the court finds no “abuse,” and no interested party files an objection to your discharge, a chapter 7 discharge should be granted within 60 to 90 days of your first creditor meeting. Of course, there are many exceptions to receiving relief under Chapter 7, which illustrates why working with trusted legal counsel is so critical from the outset.

Once a chapter 7 discharge is granted, you will be released from any liability for your unsecured debts, and your creditors will no longer be able to attempt to collect those debts, nor bring legal action against you.

Although chapter 7 will only grant relief from unsecured debts, it can be a powerful way to responsibly get your finances back on track. If chapter 7 bankruptcy sounds like a solution for your current situation, please contact us. The attorneys at Savage Villoch Law, PLLC have the experience and expertise to guide you through this process and help you regain your financial footing.

Sources: https://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-7-bankruptcy-basics

Chapter 7 bankruptcy is often referred to as “liquidation bankruptcy” because it allows individuals to completely discharge some portions of their debt, but only after certain assets have been liquidated. It is both the fastest and most common type of bankruptcy, and often allows debt to be discharged within three to five months of filing. However, before filing, there are some important factors to consider.

First, you should consider your current financial situation to determine eligibility. When filing for Chapter 7 bankruptcy, a variety of financial documents will be disclosed, including schedules of assets, liabilities, income, and expenditures, transcripts of tax returns, and a list of all owned property, among other information. As with any form of bankruptcy, individuals must also undergo credit counseling and provide a record of completion before filing.[1]

In addition, your income must either be below the median income of your state, or you must pass the Chapter 7 means test to be eligible for Chapter 7. The means test calculates whether an individual has enough disposable income, or income left over each month after expenses have been paid, to feasibly repay their debt. If the test determines there is not enough disposable income, you may qualify for Chapter 7 even with an income above your state’s median level.

Once eligibility has been determined, it’s important to consider the nature of the assets you currently own. Because Chapter 7 requires liquidation of certain assets, it is often best suited for those who either do not own lots of assets or otherwise high-value property that they do not wish to sell. Each state is permitted to set its own property exemption laws which determine how much property is exempt and thus protected from being sold to cover an individual’s debt. While exemptions vary by state, each state sets out a dollar limit, above which any property, or assets, may be sold to cover an individual’s debts. In Florida, you can exempt your owned home 100%. Additionally, you can generally keep things like your clothing, furniture, electronics, and your car (by either exempting it or reaffirming the car loan).

Once eligibility and property exemptions are considered, the filing process can begin. As soon as a petition for Chapter 7 is filed, the individual who filed is protected from most collections against them or their property. Each case is then assigned a trustee, who primarily handles the selling of any nonexempt assets or processing a no-asset bankruptcy.

In a typical Chapter 7 case, an individual’s debt will be discharged within 3 to 5 months. However, the debts discharged under Chapter 7 will be only “unsecured” debts, including credit card debt, personal loans, medical bills, and any other debt that is not secured by collateral. Secured debt, like mortgages, student loans, and car loans, will not be discharged under Chapter 7. It is also important to remember that Chapter 7 can negatively impact your credit score for up to 10 years if you don’t work to rehabilitate your credit score.

While a vast majority of Chapter 7 petitions result in a discharge of the individual’s debt, there are quite a few eligibility exceptions and other pre-filing considerations. Guidance from trusted legal counsel can be indispensable in determining your eligibility and whether Chapter 7 is the best step forward for you.

If you are interested in learning more about the Chapter 7 bankruptcy feel free to contact Savage Villoch Law, PLLC.

Sources:

[1] https://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-7-bankruptcy-basics

[2] https://www.nolo.com/legal-encyclopedia/chapter-7-bankruptcy-means-test-eligibility-29907.html