Chapter 7 is the most common type of bankruptcy. It enables you to discharge most of the common types of unsecured debts, like credit card debt, medical and other bills, personal guarantees and deficiencies from mortgage foreclosures. You can also get rid of any unpaid interest on those debts.
Although Chapter 7 may require you to give up assets in return for being relieved of your debts, most people can keep everything they own, including their house and car, because of “exemptions.” Basically, exemptions are lists of things you can keep from creditors in bankruptcy. Different exemptions are available under state and federal law.
Filing bankruptcy in Chapter 7 does NOT let you keep all of your property for free. If there is a lien against the property, say a mortgage on your house or a lien against your car title for a car loan, the lender still needs to be paid. If you want to keep the house or car and you are behind on your monthly payments, you would have to catch up on the payments before filing bankruptcy in Chapter 7. If you cannot catch up before filing, Chapter 13 might be a better option for you.
Chapter 7 gives you the right to keep all of your salary income after you file for bankruptcy.
Chapter 7 is usually the faster and least expensive chapter in which to file. But, not everyone qualifies for Chapter 7. Unless you also have a business with substantial debt, you generally need to be below the state “median” income for your household size or pass the bankruptcy “means test.” If your household income is too high and you don’t pass the “means test,” you would likely be eligible to file a Chapter 13 bankruptcy.
The “means test” starts with your average gross income over the six months prior to your bankruptcy filing. Income for bankruptcy purposes is not the same thing as income for income tax purposes. From your average gross income, necessities like rent, utilities and transportation costs are deducted, but your actual expenses aren’t used. IRS collection standard deductions are used instead. Also deducted are actual mortgage and car payments, health insurance, alimony payments and certain other expenses. The amount that’s left over after those allowable expense deductions is your “disposable income.”
Determining whether you qualify for Chapter 7, what exemptions you are entitled to take and whether Chapter 7 is the best type of bankruptcy for you is complicated.
During your initial consultation we will ask a lot of questions to help us understand your personal financial situation. Every person and every business is different. We will try to determine if you are eligible for Chapter 7.
We will ask a lot of questions about your assets and your debts, so that we can determine what exemptions might be available to you and what debts can be discharged. We will also ask questions about payments you have made to creditors or debts you may have incurred right before seeing us that are treated specially in bankruptcy.
During your initial consultation we will explain the bankruptcy process: what information you will need to provide us with, what happens when the bankruptcy petition is filed, why creditors must stop trying to collect debts once the petition is filed, what happens at the meeting of creditors, how long it will take for your debts to be discharged, how much it will cost and much, much more.
Chapter 7 is also an option for businesses. Andrew Balbus, will give you the benefit of his prior experience as an investment banker and business turnaround leader in explaining how Chapter 7 may be a faster and cheaper alternative to a reorganization in Chapter 11.
Filing bankruptcy gets rid of debt, but more importantly, it gets rid of the stress and hopeless feeling of dealing with unmanageable debt.
To Learn How Chapter 7 Bankruptcy Can Help You, Contact Us For A Free Initial Consultation
To discuss Chapter 7 bankruptcy in a free initial consultation, call 203-286-4121 or e-mail us.
Balbus Law Firm is a debt relief agency. We help people and businesses in New York and Connecticut file for bankruptcy relief under the Bankruptcy Code.