If your wages are being garnished, if you are facing harassment by angry creditors, or if you are making little or no income and are in over your head with debt, Chapter 7 may be the answer.
Our law firm will make sure you have filed all the necessary forms to file your Chapter 7 bankruptcy and will assist you with reaffirming secured
debts. It is essential to seek help from a professional on your road back to
Chapter 7 Overview
Chapter 7 is the section of the U.S. Bankruptcy Code that provides “asset liquidation.” A Chapter 7 is the fastest, most common type of personal bankruptcy. This is the sale of the debtors’ nonexempt property and the distribution of those proceeds to their creditors. In return, the debtor then receives a discharge, releasing the debtor from all dischargeable debts, and creditors are ordered to stop their harassment and attempts to collect the
discharged debts. While discharging does relieve a debtor of all obligations to pay that debt, not all debts can be discharged. These debts include certain taxes, alimony, child support, liens, student loans, debts occurring due to defrauding/misleading a creditor and debts not listed in the Chapter 7 bankruptcy petition. You can typically write off credit cards,
medical debts, utility bills, some tax debts, checking overdraft accounts, and personal loans.
There are particular debts that typically cannot be discharged in a bankruptcy:
This includes most student loans, court ordered fines, criminal restitution, fraudulent procured debts, child support, alimony, maintenance, and most taxes. SOME taxes CAN be discharged. An experienced lawyer would show you what assets are exempt and which debts might not be dischargeable.
Chapter 7 Process
The process begins with a “means test” instituted by the U.S. Government in the Bankruptcy code in order to determine if you qualify for Chapter 7. If you do, before a petition can be filed, you must complete an approved Credit Counseling Course either on the internet, at home, or by phone.
The next step is to file an official petition that consists of the schedules and statements of your financial affairs. This includes listing all assets, debts (even if they are non-dischargeable), creditors and their mailing addresses.
Once the petition is filed, an “automatic stay” is enacted, creating a legal barrier to collection actions from creditors. The case is then assigned to a Trustee appointed by the court who proceeds to administer the Chapter 7 bankruptcy case and conduct an examination pursuant to Section 341 of
the bankruptcy code at the Meeting of Creditors. This examination serves two purposes:
1. It allows the court to verify the validity of the claims you made concerning your financial affairs
2. It allows the court to determine if you have any “non-exempt” assets, meaning assets which exceed the limitations allowed under state law that then can be liquidated to help repay a portion of the debt sought to be discharged.
Advantages to Filing Chapter 7
Stops creditor harassment and debt collection efforts. Can “stay” foreclosure proceedings. Discharges all eligible debt. There are no limits on the debt that can be discharged. Chapter 7 proceedings are typically 90 days.
Eligibility for Chapter 7 Bankruptcy:
Two criteria determine eligibility to file for Chapter 7 as a Long Island resident:
1. Assets: Under New York State law, an individual is allowed to protect certain basic assets from their creditors, known as “exempt property.” As long as the value of your assets to do not exceed the statutory limits, you have met these criteria.
2. Income/Means Test: The means test determines whether your income is low enough for you to file for Chapter 7. The first step is to determine your average monthly income. If your total income is below the median income for your state for the 6 month period prior to filing, then you qualify.
If your income is above this median you must then determine if you have the ability to repay a portion of your debt. This question requires you to complete an analysis of your income and expenses.
The “Means Test”
The means test is a determinant of qualification to debts discharged. If you pass the means test, it is presumed that your bankruptcy is not abusive but if you fail the means test, it is presumed that your bankruptcy is abusive.
Passing the means test and consequently, earning the presumption that abuse does not exist, is essentially a green light indicating that you will be granted a discharge.
Note that Chapter 7 is sometimes referred to as Chapter Seven, CH 7, ch 7, ch seven.