Overview: Chapter 7 Bankruptcy
Diminishing Unmanageable Debt
If you have accumulated an unmanageable amount of debt, you may qualify for chapter 7 bankruptcy. At the Price Law Group, we understand that the term "bankruptcy" carries certain connotations. You may equate bankruptcy with defeat. Thinking about it may leave you feeling hopeless and uncertain. Actually, bankruptcy laws are not in place to ruin you; they are designed to give debtors a fresh financial start. If you want to live out from under the burden of overwhelming debt, consider filing chapter 7 bankruptcy. If you have questions, we urge you to talk to an attorney from the firm today – our knowledgeable team is ready to help you get the exemplary legal assistance you need to secure a better financial future.
Understanding the Basics
Chapter 7 bankruptcy, also known as "liquidation" bankruptcy involves the liquidation of your assets to pay for any standing financial obligations you cannot afford to satisfy. If you do not qualify for chapter 13, you probably qualify for chapter 7. If your petition for chapter 7 bankruptcy is accepted, your assets will be liquidated and your debts discharged. In addition to filing a petition, you must give the court a schedule of your financial assets and liabilities, a schedule of your current income and expenditures, at statement of your financial affairs and a schedule of executor contracts and unexpired leases. If you are married, you may file a joint petition with your spouse or file individual petitions.
Do I qualify?
A variety of factors contribute to your eligibility. For instance, if your monthly income is too high, you may not qualify for chapter 7. Generally speaking, your income must be less than the median income of families in the area where you live. A "means test" will be administered to see if your income disqualifies you from filing. When calculating your monthly income, the court considers your wages, salary, tips, bonuses, overtime work, commissions, interest, dividends, royalties, rental property incomes, unemployment compensation, pension and retirement income, annuity payments and factors. You do not have to include your tax refunds or payments from social security retirement benefits.
Chapter 7 bankruptcy is designed for individuals who are unable to pay for any of their debts. If your income is too high, you may be able to pay off some of your outstanding debts without any aid. If the court decides that you are able to pay off some of your debts, your petition will not be accepted. You may be disqualified from chapter 7 bankruptcy if the court has discharged previous debts within the past eight years. In other words, previous successful bankruptcy petitions will significantly decrease your chances of being able to file now. Additionally, you cannot file for bankruptcy twice within the 180 days. If your petition is not accepted, you must wait before filing again.
Defrauding Creditors
You will not qualify for chapter 7 bankruptcy if you have defrauded your creditors. What does this mean? Defrauding refers to any dishonest action you might take to aid your financial situation, including:
- Transferring assets to family members or friends
- Destroying property or assets
- Purchases unnecessary luxury items
- Lying about your income or lying on a credit application
If the court suspects hat you have participated in any of these illegal activities, your petition will be rejected and you may face criminal prosecution.
Property Exemptions
You might be afraid of filing for chapter 7 bankruptcy because you don't want to lose all of your belongings. If this is true, don't' worry. Some of your property may be exempt from liquidation. For example, motor vehicles (under a certain value) may be exempt, clothing may be exempt, and household goods and furnishings may be exempt:
- Appliances
- Jewelry (under a certain value)
- Pensions
- Personal injury damages
- Public benefits
- Tools used in your trade or profession (under a certain value)
Unless you are a professional musician, expensive musical insurgents may be liquidated. Stamp collections, coin collections, and other valuable items are vulnerable, too. Valuable family heirlooms, secondary cars, secondary homes, cash, bank accounts, stocks, bonds, investments, and other valuables may be liquidated as well.
This may seem frightening, but remember that bankruptcy is designed to help you get a new start, not leave you in financial destitution for the rest of your life. The court will not take away things that are necessary to live. If you have questions about property exemptions or other issues related to chapter 7 bankruptcy, speak with an attorney from the Price Law Group as soon as possible to get the legal assistance you need for a bright financial future.