Chapter 7 bankruptcy is a liquidation which results in the discharge of most debts without tax consequences. In most instances, filing a Chapter 7 bankruptcy will result in a debt free fresh start.
The Chapter 7 process usually takes approximately 4 months from filing to discharge. Usually, only one meeting with the US Trustee is required. This meeting is held approximately 6 weeks after the filing of your bankruptcy petition. The meeting will be conducted by the Trustee assigned to your case and you will be accompanied by your attorney and an interpreter, if necessary. This meeting lasts between 5-10 minutes and is a generally a review of all of the information contained in the bankruptcy petition. It is possible but unlikely that some of your creditors may attend the meeting to ask you questions regarding your financial affairs. After the 341 meeting, your creditors have an additional 60 days to object to the discharge of your debts. If no objection is made and you have completed your second debtor education course, you will receive your discharge in the mail.
Qualifications to file
Earning Income below the state median automatically qualifies you for a Chapter 7 bankruptcy.
The state median amount fluctuates and is determined by the US Census Bureau. Approximate figures are:
- $54k Single Individual or married separated Individual
- $71k Married Couple
- $82k Married Couple with 1 Dependant
- $101k Married couple with 2 Dependants
- $110k Married couple with 3 Dependants (amount is increased by approximately $10k for each additional dependant)
If your income is greater than the above listed amounts you attorney can also perform a means test to determine if your income after expenses and deductions qualify you for a Chapter 7 bankruptcy. In many cases you may still qualify for Chapter 7 bankruptcy even if you are significantly over the median numbers. You should provide a truthful and accurate description of all sources of income so that our office can protect your interests to the full extent possible under the law.
Possessing assets below the state exemptions
- $15,000 home stead exemption for each person on title, married couples $30,000.
- $4,000 personal property exemption, $8000 for married couple.
- $2,400. Car exemption, Married couple $4,800.
- Most qualified retirement plans (401Ks and IRAs) and pensions are exempt without.
- $15,000 of your personal injury claim
- 100% of your workmen's compensation claim
Many other state exemptions may also apply. Contact one of our attorneys for more information.
All assets in excess of the listed exemptions could potentially be seized by the US Trustee and sold during the bankruptcy process to pay your creditors. Provide a truthful and accurate description of all your assets so that our office protects your interests to the full extent possible under the law.
The Bankruptcy Process
Completing the Credit Counseling / Debtor Education Requirement
Each individual filing a Chapter 7 bankruptcy must satisfy the two credit counseling requirement which is required by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. For more information on debtor education courses open http://www.cccs-express.org
Automatic Stay
Upon the filing of your bankruptcy case you will be under the automatic stay. The automatic stay is essentially a court imposed injunction which stops all collection activity by creditors. This means that once your case is filed all creditor harassment, and or any collection will cease. If any creditor violates the automatic stay you may be entitled to sanctions.
Reaffrimation
During the duration of you bankruptcy case you will have the option to reaffirm some of your debts. These agreements usually pertain to cars and real property that a individual wants to retain and keep paying on under the terms of the original loan. A reaffirmation agreement essentially reinstates a debt that would otherwise have been discharged in bankruptcy. One of our attorneys will carefully review these documents with you and help you determine if a reaffirmation agreement is a good financial decision in your situation.
Dischargeability
Chapter 7 bankruptcy eliminates most debts:
- Credit Card Debt is eliminated
- Mortgages and equity lines on homes surrendered are eliminated
- Vehicle loans on vehicles surrendered are eliminated
- Medical Bills are eliminated
- Personal loans and personally guaranteed loans are eliminated
- Judgments and some liens are eliminated
- Personal guarantees on business loans are eliminated
- Income taxes for periods 3 years preceding the bankruptcy filing which were timely and properly filed are eliminated
Some debts will not be discharged:
- Most student loans are non dischargeable
- Fines and fees owed to the government are non dischargeable
- Child support and alimony is non dischargeable
- Taxes assessed for periods less then 3 years preceding a bankruptcy filing or taxes which were not timely or properly filed are non dischargeable
- Association dues assessed for periods post bankruptcy filing are non dischargeable
- Debt incurred through fraud or incurred without the intent to be paid are non dischargeable
- Debts for certain purchases or cash advances incurred shortly before the bankruptcy was filed are non dischargeable
- Secured loan/ liens against property retained will no be discharges as to that property so if you wish to retain that property you will be required to continue making payment
Post Discharge
Rebuilding your credit score
Immediately after filing bankruptcy your credit score may decrease, however, most people find several months after discharge their credit score is higher then it was before they filed bankruptcy. It is important to check your credit 3 month after your discharge to ensure that all debts discharged in your bankruptcy are reflected a $0 balances on your credit report. It is important to note that bankruptcy eliminates your debt essentially clearing your credit report of liability but you must take active steps to build your credit by getting credit. Below are some steps on building your credit after bankruptcy.
Checking Your Credit Report
Credit is very important. It determines the rate at which you can borrow money. So maintaining a good credit score is essential to being financially successful. Each person is entitled to one free copy of your credit report once every year. The three major national credit bureaus are:
- Equifax, P.O. Box 740241, Atlanta, GA 30374-0241; (800) 685-1111
- Experian (formerly TRW), P.O. Box 2002, Allen, TX 75013; (888) EXPERIAN (397-3742)
- Trans Union, P.O. Box 1000, Chester, PA 19022; (800) 916-8800
An Annual Free Credit Report is available at https://www.annualcreditreport.com/cra/index.jsp
Correcting Errors
Since your credit report directly affect the amount of credit you can obtain and the costs associated with borrowing money, it is very important to make sure your credit report is accurate. Your creditors have an obligation to only report accurate information on your credit report. If there are mistakes on your credit report you should notify the above referenced credit bureaus and demand a correction.
Your request should be in writing. The letter should contain information which identifies you such as your social security number, date of birth, first and last name and current address as well as your signature. Further you must explain what information is inaccurate and provide proof that it is inaccurate. Generally, the credit bureau will investigate the disputed information within 30 days of your request. You will receive a report stating the outcome of the investigation.
Click here to download a sample letter for disputing your credit report (MS Word document, 27KB).
