Chapter 7 Bankruptcy

The 7 Most Common Bankruptcy Mistakes

 

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The 7 Most Common Bankruptcy Mistakes

 

Request your free copy now!!

 

 

Your Name (required)

Your Email (required)

Chapter 7 Bankruptcy, often referred to as a straight liquidation, serves to discharge (i.e., eliminate) your liability for most debts, giving you a fresh start. The discharge is usually granted within 90 to 120 days of filing the case. A discharge is available to individuals, not partnerships or corporations, although it can sometimes be used to close a business. See the business bankruptcy page for further information on business bankruptcies.

 
Most debts are discharged in Chapter 7 cases, with the exception of certain special debts such as child support, student loans, some taxes, and debts incurred by fraud, etcetera.

 
Non-exempt assets are also subject to liquidation, which means you could lose certain assets, although proper planning can avoid that. See the bankruptcy asset protection page for further information.

 
Filing a Chapter 7 bankruptcy automatically stays (i.e., stops) your creditors from pursuing any collection activity against you, including wage garnishments, repossessions and foreclosures. However, the stay is temporary so you will need to bring auto and mortgage loan payments current quickly in order to avoid repossession or foreclosure, if that is your goal.

 
In order to file Chapter 7 bankruptcy and receive a discharge, you must meet the eligibility criteria. Eligibility is primarily based on your income and expenses, as well as whether or not you've ever filed bankruptcy before, and if so, how long ago. There is no maximum debt limit in Chapter 7.

 
Income is not required in a Chapter 7. However, if your income is too high you will not qualify for Chapter 7. There is no particular income that constitutes "too high." It just depends on your particular circumstances.

The income and expense analysis is not as straightforward as many people think, including some attorneys. It can be a complicated process, and can be either very rigid or surprisingly flexible, depending on individual circumstances. I am shocked at the number of attorneys who either do not know how this process works, or who are unwilling to do the work necessary to make a Chapter 7 possible.

 

You are eligible for Chapter 7 if it has been at least eight years since you received a discharge in a prior Chapter 7 or Chapter 11 case, or at least six years since you received a discharge in a prior Chapter 13 case, unless you paid 100% of your debt in the Chapter 13.

 

Most people do not have to pay anything toward their debts in a Chapter 7. The only exceptions are the potential loss of non-exempt assets and potentially being held liable for bankruptcy landmines.

 

Chapter 7 bankruptcy law does not provide for any type of modification on a mortgage or a car loan, as it does under Chapter 13. However, you do usually have the right to retain your home and mortgage loan if you choose. You also have the right to keep your vehicle and either reaffirm or redeem your auto loan. Reaffirmation is the process of signing a new agreement with your lender. Redemption is the process of purchasing your vehicle for the current fair market value and discharging the remaining balance of the loan. This is a fantastic benefit of bankruptcy if your loan is upside down. You also have the right to surrender your home or vehicle and the associated debts.

 

It is possible that the trustee and/or your creditors could object to something in your case, including your bankruptcy discharge itself. And, it's also possible to handle your bankruptcy case yourself; many people do. However, you need to understand that bankruptcy is a complicated legal proceeding, it is intensely rule driven, and it's pretty darn scary, so it's usually wise to have an attorney assist you.

 

People who do not qualify for Chapter 7 will usually qualify for Chapter 13 instead. On the other hand, even if you qualify for Chapter 7, sometimes it's more beneficial to do a Chapter 13. See the Chapter 13 Bankruptcy page or the Bankruptcy Process page for further information.

 

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Chapter 7 Bankruptcy, often referred to as a straight liquidation, serves to discharge (i.e., eliminate) your liability for most debts, giving you a fresh start. The discharge is usually granted within 90 to 120 days of filing the case. A discharge is available to individuals, not partnerships or corporations, although it can sometimes be used to close a business. See the business bankruptcy page for further information on business bankruptcies.

 
Most debts are discharged in Chapter 7 cases, with the exception of certain special debts such as child support, student loans, some taxes, and debts incurred by fraud, etcetera.

 
Non-exempt assets are also subject to liquidation, which means you could lose certain assets, although proper planning can avoid that. See the bankruptcy asset protection page for further information.

 
Filing a Chapter 7 bankruptcy automatically stays (i.e., stops) your creditors from pursuing any collection activity against you, including wage garnishments, repossessions and foreclosures. However, the stay is temporary so you will need to bring auto and mortgage loan payments current quickly in order to avoid repossession or foreclosure, if that is your goal.

 
In order to file Chapter 7 bankruptcy and receive a discharge, you must meet the eligibility criteria. Eligibility is primarily based on your income and expenses, as well as whether or not you've ever filed bankruptcy before, and if so, how long ago. There is no maximum debt limit in Chapter 7.

 
Income is not required in a Chapter 7. However, if your income is too high you will not qualify for Chapter 7. There is no particular income that constitutes "too high." It just depends on your particular circumstances.

 

 

The income and expense analysis is not as straightforward as many people think, including some attorneys. It can be a complicated process, and can be either very rigid or surprisingly flexible, depending on individual circumstances. I am shocked at the number of attorneys who either do not know how this process works, or who are unwilling to do the work necessary to make a Chapter 7 possible.

 
You are eligible for Chapter 7 if it has been at least eight years since you received a discharge in a prior Chapter 7 or Chapter 11 case, or at least six years since you received a discharge in a prior Chapter 13 case, unless you paid 100% of your debt in the Chapter 13.

 
Most people do not have to pay anything toward their debts in a Chapter 7. The only exceptions are the potential loss of non-exempt assets and potentially being held liable for bankruptcy landmines.

 
Chapter 7 bankruptcy law does not provide for any type of modification on a mortgage or a car loan, as it does under Chapter 13. However, you do usually have the right to retain your home and mortgage loan if you choose. You also have the right to keep your vehicle and either reaffirm or redeem your auto loan. Reaffirmation is the process of signing a new agreement with your lender. Redemption is the process of purchasing your vehicle for the current fair market value and discharging the remaining balance of the loan. This is a fantastic benefit of bankruptcy if your loan is upside down. You also have the right to surrender your home or vehicle and the associated debts.

 
It is possible that the trustee and/or your creditors could object to something in your case, including your bankruptcy discharge itself. And, it's also possible to handle your bankruptcy case yourself; many people do. However, you need to understand that bankruptcy is a complicated legal proceeding, it is intensely rule driven, and it's pretty darn scary, so it's usually wise to have an attorney assist you.

 
People who do not qualify for Chapter 7 will usually qualify for Chapter 13 instead. On the other hand, even if you qualify for Chapter 7, sometimes it's more beneficial to do a Chapter 13. See the Chapter 13 Bankruptcy page or the Bankruptcy Process page for further information.

 

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