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Often referred to as liquidation or fresh start bankruptcy, Chapter 7 provides the debtor (person filing bankruptcy) with the opportunity to discharge certain debts and restart and rebuild their credit.

Chapter 7 has the potential to discharge or wipe out unsecured debt such as credit cards, medical bills, pay day loans, foreclosure deficiencies, repossession deficiencies from old vehicles that have been repossessed, and some tax debt.

The bankruptcy filing creates an automatic stay which prevents creditors from all collection activities. This automatic stay is especially helpful to those who are being sued or facing garnishment. If you’ve been served with a lawsuit, call me today to discuss.

There is a lot of misinformation regarding fresh start, Chapter 7 bankruptcy. An experienced bankruptcy attorney will help you determine what assets, if any, could be liquidated by the Chapter 7 trustee. You should have a good idea if there is any unprotected property prior to filing. Your personal property including your car and home can be protected by the appropriate bankruptcy exemptions. You may not necessarily lose your car unless you chose to surrender and you have the option to keep your home (if you can show that you can afford).

Brief Overview of Chapter 7 Process

The Chapter 7 bankruptcy process can be complex and it is advisable to contact a bankruptcy attorney prior to filing. Sims Bankruptcy Law offers flexible payment options to get your Chapter 7 case moving.

First you will meet with your bankruptcy attorney to discuss your options related to your debts and income.
Once a path forward has been selected, you and your bankruptcy attorney will work together to complete the petition, schedules, and other documents necessary for filing. Your bankruptcy attorney will let you know what documents are necessary.

Second, your bankruptcy attorney will get your Chapter 7 petition prepared and you will meet to sign and review those documents. The court filing fee is $335.00. The attorney will confirm that you have taken an approved credit counseling course and then the attorney will file the case.

Third, you will attend a meeting of creditors with your attorney and a Chapter 7 trustee. This is the time where any creditor may show up to ask you questions related to your financial situation.

Fourth, you will take a second credit counseling course and await either your attorney’s request for more documents or the discharge order.

Things to consider

Means Testing

The Means Test is a formula that tells the Bankruptcy Court whether or not you make too much money related to your household size. Businesses do not complete the means test. There are many deductions that are taken to see if you have the means to pay back your creditors. The means test is based on the past six months of income that a debtor’s household earns. Some income sources such as Social Security benefits will not be included in the means test calculation. If the debtor’s income for the past six months averages less than the median income for the corresponding household size, the debtor does not need to complete the second part of the means test.

If the debtor’s income is greater than the median income for the debtor’s household size, the second portion of the means test will need to be completed. This section is where certain deductions can be taken to allow the debtor to show that they do not have the financial means to repay their debts.

Keeping your car or house

If you choose to keep your vehicle, your home, both ,or none, a creditor may send your attorney a reaffirmation agreement. This agreement lays out the terms that you and your creditor will be bound to after the discharge order is entered. A careful examination of the reaffirmation agreement by you and your attorney will allow you to determine if it makes financial sense to keep one, both, neither of those secured debts. If you choose to not reaffirm and surrender the secured debt, you will surrender the property to that creditor and discharge any remaining debt you owe to that creditor. If you choose to reaffirm that debt, you will be obligated to pay after the discharge order is entered.

Disclosing all assets to your attorney

It is imperative that you disclose all assets that you owe or think you may owe to your bankruptcy attorney. Should you fail to list an asset, the consequences could be extraordinary. As previously mentioned, if you tell your attorney everything, they will be able to advise you accordingly.