Chapter 7 Bankruptcy
At Morgan & Morgan, we see clients every day that have lost hope and don’t know where to turn. When you are in financial straits, your options may appear to be limited. In this economy many people are losing their jobs, behind on their mortgage, fighting foreclosure on their home and trying to catch up on their medical bills. Sometimes, debts are insurmountable and options can be severely limited when it comes to catching up, however there is one option you have that can literally wipe your slate clean, filing for chapter 7 bankruptcy.
What is Chapter 7 Bankruptcy?
Chapter 7 Bankruptcy is a process used by individuals who are unable to pay their debt obligations. In order to pay them off, a bankruptcy trustee is appointed to arrange the liquidation of a debtors assets. This is typically referred to as “straight bankruptcy. The proceeds obtained from the sale of the liquidated property is then used to satisfy any debts.
When you file for chapter 7 bankruptcy, the process will discharge most unsecured debts, which are debts for which you have put up no collateral. Unsecured debts include credit card debt, medical bills, and personal loans. In effect, filing for chapter 7 clears out your debt obligations allowing you to start from scratch.
How Do I File for Chapter 7 Bankruptcy?
To file for Chapter 7 Bankruptcy, you generally file your case in the District where you reside or have resided for the last 180 days. Filing is more than simply filling out paperwork and filing it in any given district, you should consult a bankruptcy attorney and weigh your options before filing because the after-effects of filing last for several years.
How Long Does it Take to File for Chapter 7 Bankruptcy?
The entire process can last for approximately four to six months. The standard filing fee associated with filing for Chapter 7 bankruptcy is $385 ($335 court costs and $50 credit counseling). When handled properly with the assistance of a bankruptcy attorney, the filing process can be handled in one trip to the courthouse.
What Happens When I file for Chapter 7 Bankruptcy?
Whenever a bankruptcy case is filed, an automatic stay automatically goes into effect. An automatic stay temporarily prevents any creditor from engaging in collection activities or pursuing a debtor for an amount owed for the duration of the bankruptcy, this mechanism goes into place immediately after filing for bankruptcy.
Can Anyone File for Chapter 7 Bankruptcy?
No. Actually, only those who qualify can file for Chapter 7 bankruptcy. To become eligible, you must be meet the requirements set by the “means test” which is a method used to determine whether your income is low enough for you to file. Chapter 7 bankruptcy is meant for individuals who have a low income and truly have difficulty paying off their debts. The means test assesses your eligibility by deducting your monthly expenses from your monthly income. This test finds your disposable income and measures it against the average disposable income of other families. If your disposable income is lower than the average disposable income, then you qualify. If your disposable income is higher, then you do not. For individuals who have a disposable income that is too high to qualify, filing for chapter 13 bankruptcy is another option.
Is Filing for Bankruptcy Right for Me?
Bankruptcy filing is accompanied by serious repercussions and should not be a decision that is made without some serious thought. That being said, before you consider filing for bankruptcy ask yourself these three key question to assess whether bankruptcy is your best option:
- How badly do I need relief? If you are being hounded by creditors, facing wage or bank garnishments, your home is facing foreclosure, or you are being dragged to court, then bankruptcy may be the relief you need. If you debts are causing issues with your job, health, family and friends then some action needs to be taken.
- Do I qualify for bankruptcy relief via Chapter 7 filing? Remember, in order to qualify for Chapter 7 filing, you must be considered eligible via the means test. If you do not qualify, you should speak with a Chapter 13 bankruptcy attorney to see if Chapter 13 filing is a viable option.
- Will filing for bankruptcy really help my current situation? In some cases, filing for bankruptcy won’t alleviate your problems. Not every debt is discharged in bankruptcy. Some debts may postpone requirement to pay during the bankruptcy period, but once the bankruptcy process is complete, you will still be responsible to pay. Debts that are not discharged during bankruptcy are unpaid income taxes, child support, alimony and student loans.
Morgan & Morgan has over 30 years of experience helping individuals just like you successfully file for Chapter 7 bankruptcy and begin to turn their lives around. If you or a loved one is contemplating filing for bankruptcy, contact Morgan & Morgan today for a free consultation with one of our expert bankruptcy attorneys.