What Is Chapter 7 Bankruptcy?
A chapter 7 bankruptcy is called a no-asset case, and involves a person who doesn’t have a house or does not have a house with substantial equity, and who doesn’t have an income above the median income level. Essentially, people who file for chapter 7 bankruptcy don’t really have any non-exempt assets to protect.
What Specific Requirements Must Be Met In Order For An individual To File A Chapter 7?
When deciding whether or not to file for a chapter 7 bankruptcy, I look at the individual’s assets, what properties they own, how much money they have in their bank account, what their income level is, what the household income level is between themselves and their spouse, how many children they have, how many dependents they have and the amount of their monthly expenses.
What Is The Means Test? Does It Justify Filing a Chapter 7 Bankruptcy?
The means test provides that if you make a certain amount of money above a federal guideline, then it is assumed that you have an ability to pay back a certain percentage of your debt. If your income is not above the median income based on your location, then the means test does not become a factor. Most of my clients are below the median income, so the means test is generally not applicable. If a client is above the median income, then they have to accept the expenses that the government allows in order to apply for a full discharge under a chapter 7 bankruptcy.
What Kind Of Debt Is Typically Discharged In A Chapter 7 Bankruptcy?
Since 1998 I have been practicing bankruptcy law and filing chapter 7 bankruptcies for clients, I have seen all different types of dischargeable debt. Most of the debt that a client seeks to discharge is credit card debt, but it could be a mortgage, a car loan, old phone bills, medical bills, gambling debts, judgments or pending lawsuits. These types of debts cover about 95% of what I see, but please call to inquire whether or not any other type of debt is dischargeable.
What Debt Would Not Be Forgiven In A Chapter 7?
Chapter 7 bankruptcies would not forgive any sort of criminal penalties or fines, taxes, child support or maintenance owed to a spouse and most student loans.
What Am I Going To Be Able To Keep In a Chapter 7 Bankruptcy?
Depending on the value of your home and how much is owed on it, you’ll most likely be able to keep your primary residence. Otherwise, a chapter 7 bankruptcy may not be the best option for you. You’ll be able to retain all of your personal property, including household belongings, clothing, certain jewelry and your automobile in most cases and tools and equipment required for your occupation. Retirement and pension benefits, social security benefits or public assistance are generally not affected.
What Are The Major Differences Between Chapter 7 And Chapter 13 Bankruptcy?
A chapter 7 is basically a no-asset case in which you are trying to discharge 100% of your debt and you don’t have any non-exempt assets to protect. If you make a large sum of money or have a home with significant equity, you might be more likely to file a chapter 13. In a chapter 13 bankruptcy, you enter into a payment plan with the trustee and the court whereby you pay back a certain percentage of your debt in order to protect your assets from levy, garnishment or foreclosure.
How Do You Help Clients To Determine Which Bankruptcy Chapter Is Suitable For Them?
When I’m evaluating a client for a particular bankruptcy case, I ask them about their income, their assets, their liabilities and their monthly expenses. These are all factors in determining whether a chapter 7 or a chapter 13 repayment plan is appropriate.
Is One Chapter Of Bankruptcy Better Than The Other For My Credit Score?
Clients filing any chapter of bankruptcy will surely take a hit on their credit. However, their credit will begin to improve as soon as the discharge is issued. From start to finish, a chapter 7 case might take three to five months. If a client focuses on their credit after a discharge has been issued, then their credit score will improve. They may obtain a secured or low-limit credit card which they will use and pay on a timely and regular basis. In a chapter 13 plan, a client will be in a repayment plan for up to five years, and their credit typically won’t start to improve until after that five years. So, a credit score will begin to improve earlier in a chapter 7 bankruptcy compared to a chapter 13 bankruptcy.
What Generally Happens After A Client Has Gone Through The Bankruptcy Process?
A bankruptcy case officially ends when the discharge is issued from the bankruptcy court. Once I get the discharge from the court, I will send the discharge letter to the client, essentially ending the case and my representation. The discharge letter will notify the client that their case is over and give them certain options to rebuild their credit, such as obtaining a collateralized credit card or a low credit limit card. Of course, they have to utilize their credit card and pay their credit card bill in a timely fashion in order to increase their credit score.
For more information on Chapter 7 Bankruptcy In New York, an initial consultation is your best next step. Get the information and legal answers you’re seeking by calling (914) 686-3171 today.