If you are buried in debt and feel like you will never be able to crawl out of the hole, bankruptcy may be the answer. At Bond & Botes, we can help. We understand that there is no one-size-fits all approach to bankruptcy. There are different laws depending on your personal financial situation and whether you want to be free of all debt or reorganize it so you can pay off some of it over a period of years. Chapter 7 bankruptcy is the approach that will free you of your debt. Our attorneys have years of experience guiding clients through financial difficulties, and we can help you decide if Chapter 7 is right for you.
Chapter 7 Bankruptcy Overview
Chapter 7 bankruptcy is designed to give debtors a “fresh start” in their financial life. At the end of the process, all qualifying debts are discharged, which means you will never have to pay them. Filing a bankruptcy petition is complicated and time consuming and not all debts are dischargeable. An attorney can help you make important decisions prior to filing your bankruptcy petition.
How Chapter 7 Bankruptcy Works
There are steps in the bankruptcy process that must be followed in order for it to work for you:
The means test. The first step is to determine if you are eligible to file a Chapter 7 bankruptcy petition by taking a “means test.” Your income must be lower than the median income in your state. If your income is too high, you may not be eligible to file for bankruptcy under Chapter 7.
Credit counseling. If you are eligible, you then must take a court approved credit counseling course. You can take it online in just a few hours. You must attach a certificate of completion to your petition.
File your bankruptcy petition with schedules attached. The schedules list all of your income and all of your debts. If you neglect to include a debt on your schedule, that debt will not be discharged at the end of the process. On the date you file your petition, creditors can no longer pursue collection action unless they get a court order.
Appointment of a trustee. The trustee reviews your petition to be sure everything is order and may request more information from you.
Meeting of Creditors. This is a meeting with the trustee and any of your creditors who choose to show up and ask you questions.
Your debts are discharged. Debts eligible to be discharged under Chapter 7 will be discharged. This includes credit card and other unsecured debt, rent and utilities that are past due, and medical bills.
How a Chapter 7 Bankruptcy Attorney Can Help
Here are just a few things our experienced bankruptcy attorneys will do to help you. First, prior to filing your bankruptcy petition, we will:
- Review your entire financial situation to determine if bankruptcy is in your best interest and if you have the type of debt that will be discharged.
- Choose the right bankruptcy process that will work best for you.
- Prepare your petition. Each court has different requirements about what documents need to be filed. In addition to the petition, “schedules” must be attached to your petition. If you inadvertently leave a debt off your petition, you may still end up owing it at the close of the proceeding and it will not be discharged.
We will attend meetings called by the trustee and assist you throughout the proceedings. Bankruptcy experts say that those who go through bankruptcy with the assistance of an attorney have more of their debt discharged and are able to keep more of their assets.
Why File Chapter 7 Bankruptcy?
If you feel like you are buried In debt, and climbing out from under it seems impossible, you may be able to make a fresh start by filing for Chapter 7 Bankruptcy. Some reasons why you may decide to file for bankruptcy include:
- You do not answer your phone if you do not recognize the number, or you know it is from a creditor.
- Most of your credit cards are maxed out.
- You only make the minimum monthly payment on your credit cards.
- You avoid going to the doctor because you are already weighed down with medical bills you haven’t paid.
- You have no emergency fund.
- You have either received, or are afraid of receiving, an eviction notice from your landlord or a foreclosure notice from your mortgage holder.
There is hope. On the day you file your petition, your creditors are notified and can no longer take collection action against you unless they obtain an order from the bankruptcy court allowing it. This gives you some breathing room and should provide relief from your stress.
At the end of the Chapter 7 bankruptcy proceeding, the following types of debts will be discharged, meaning you no longer will owe them.
- Credit card and other unsecured debt.
- Medical bills.
- Past due rent and utility bills.
- Income taxes that are more than three years old.
You will still owe back alimony and child support, a monetary penalty imposed by a court, and most likely student loans.
Do You Qualify for Chapter 7 Bankruptcy?
Each state has what is called a “means test” to determine if you qualify for Chapter 7 bankruptcy. This means your income must be lower than the median income for your state. If your income is too high, you generally do not qualify. A bankruptcy attorney will evaluate your income and your expenses of daily living. If your expenses are very high, you may still qualify even if your income is too great. Many of our attorneys at Bond & Botes have been practicing bankruptcy law since before the means test was invented. We have years of experience to help you make sense of this complicated area of the law.
What Happens When You File Your Bankruptcy Petition
When you file your bankruptcy petition with the court, you are given a case number. At that time, all creditors must cease collection action. If you receive a collection call, tell the creditor that you have filed for bankruptcy, and tell them that if they have any questions to call your attorney at Bond & Botes. We deal with creditor and collection calls so you don’t have to. Once your case is filed it is illegal for creditors to contact you and make any other collection attempts during the course of the bankruptcy proceedings.
Will You Lose Your Property?
When you file your petition and receive your case number, a bankruptcy trustee is assigned to your case. The trustee reviews your financial status and, while in theory, the law requires you to give up your assets to the trustee who then sells them to pay your creditors, each state has its own laws regarding which property is exempt from taking by the trustee. This means you get to keep it. In general, you should be able to keep:
- Equity in your house up to a certain amount, which you may be able to keep.
- Equity in your car, which means you may be able to keep it.
- Ordinary household goods and personal property.
At Bond & Botes, we stay up to date on all the developments and changes in state and federal exemption laws in order to keep your hard-earned assets safe. When you consult with one of our attorneys, we’ll make sure you understand all the risks and benefits of filing a bankruptcy case.
Types of Debt That Will Be Discharged
Not all debt is discharged in a Chapter 7 bankruptcy. Debts that can be discharged include:
- Any unsecured debt including personal loans to friends.
- Credit card debt.
- Medical bills.
- Past due rent.
- Past due utility bills
- Income taxes that are more than three years old.
If the majority of your debt falls into any one of these categories, Chapter 7 bankruptcy will provide you the fresh start you need, and you will be relieved of these debts.
Debts That Will Not Be Discharged
If you have any of the following type of debt, Chapter 7 may not be the proper bankruptcy proceeding for you since these debts will not be discharged. That means you will still owe them at the end of the bankruptcy process.
- Outstanding child support or alimony.
- Any debt you owe that was imposed by a court because you broke the law.
- Student loans: the law is changing on this rule, but as it stands now, you have to show that repaying your loans would be an “extreme hardship.” This is a difficult thing to do and student loans are rarely discharged in bankruptcy proceedings.
If you’re having financial problems as a result of one of these debts, don’t let that stop you from considering bankruptcy! At Bond & Botes, you will meet with an attorney who can help you examine all your options on the path to financial recovery.
Contact us at the Bond & Botes law offices. We offer a free initial consultation with an experienced lawyer who keeps up to date on federal and state bankruptcy laws. The attorney will review your financial situation and determine if Chapter 7 bankruptcy is the right approach for you.