Chapter 7 bankruptcy is a type of bankruptcy which clears away majority of unsecured debts. Also known as liquidation or straight bankruptcy, it allows people that are behind on their bills and don’t have any means to afford living expenses and monthly payments to reset their finances. However, the filing will have a negative effect on your creditworthiness and you may be required to give up a few of your possessions.
Attorneys at SBEMP (Slovak, Baron, Empey, Murphy & Pinkney) law firm provides professional legal advice and services to clients in Palm Springs, Palm Desert, Rancho Mirage, Inland Empire, Orange County, Coachella Valley, Costa Mesa, San Diego, New Jersey, New York, and surrounding communities.
Process for Chapter 7 Bankruptcy
The court will automatically place a temporary stay on your debts when you file for Chapter 7 bankruptcy. This will stop creditors from trying to collect payment, foreclose your home, garnish wages, evict you, repossess property, or turn off utilities. The court will legally possess your property and appoint a bankruptcy trustee.
The trustee’s job will be to go over your assets and finances and to oversee the proceedings of Chapter 7 bankruptcy. They may sell some part of your property (non-exempt property) and use the proceeds for repaying the creditors. The trustee will also mediate a meeting between you and the creditors (creditor meeting) at the courthouse where you will be required to answer questions regarding the filing.
The list of exempt property (which you don’t need to turn over to creditors or sell) and the total exempted value differs by state. Most Chapter 7 bankruptcy cases involve complete exemption with no valid lien against the property. These are also known as no asset cases.
After about 4 – 6 months, when you are at the end of the process, the court will discharge all remaining debts. You won’t be required to pay them. However, there are certain types of debts which cannot be discharged through bankruptcy. This includes court fee, alimony, child support, most student loans, and some tax debts.
Do You Qualify for Chapter 7 Bankruptcy?
You will need to meet a few requirements to file for a Chapter 7 bankruptcy:
- You would need to complete a group or individual credit counseling course from an approved credit counseling agency before filing (within 180 days).
- The average of monthly income in the last 6 months should be lower than the median income for a similarly sized household in the state. Or, you need to pass a means test in which the disposable income should be high enough for making partial payments towards unsecured creditors.
- You should not have filed Chapter 7 bankruptcy in the last 8 years.
- You should not have filed Chapter 13 bankruptcy in the last 6 years.
- You need to wait a minimum of 181 days if your bankruptcy filing was dismissed by the court.
Types of Discharged Debts Under Chapter 7 Bankruptcy
All unsecured debts will generally be discharged through Chapter 7 bankruptcy. This includes medical bills, credit card debts, and unsecured personal loans. The court will take 4 – 6 months from the filing date to discharge these debts.
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SBEMP LLP is a full service law firm with attorney offices in Palm Springs (Palm Desert, Inland Empire, Rancho Mirage, Indian Wells), CA; Indian Wells, CA; Costa Mesa (Orange County), CA; San Diego, CA; New Jersey, NJ; and New York, NY.
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