What is Chapter 7 Bankruptcy?
Chapter 7 Bankruptcy—often known as a “liquidation Bankruptcy”—legally discharges most, if not all, of your debt. Under Chapter 7, medical bills, personal loans, credit card debt, and the like may all be discharged. Additionally, if the individual filing for Chapter 7 also wished to surrender property that secures a debt—such as a house, car, or any other property used as collateral—the Chapter 7 process allows the debtor to surrender the property and walk away from the debt. However, a Chapter 7 debtor can also choose to keep and pay for the property they can afford and continue to pay the debt for which that property secures. As the simplest, quickest, and most common form of Bankruptcy, Chapter 7 accounts for over 60% of Bankruptcy filings.
How do I qualify for Chapter 7 Bankruptcy?
Qualifying for a Chapter 7 requires a debtor to submit all income (except income derived from the Social Security Act and certain VA income) so that a “means test” can be conducted. If a debtor’s (or joint debtors’) income is below the median income for the debtor’s household in the state in which they live, the debtor will qualify for a Chapter 7 filing. If the debtor does not qualify for Chapter 7, they may file for Chapter 13 (or another form of Bankruptcy).
Strong indicators a debtor will meet the requirements to file a Chapter 7 Bankruptcy petition include but are not limited to debts that total more than half of the debtor’s annual income, a monthly income that is below the state median, or little to no money left at the end of month.
What will happen when I file Chapter 7 Bankruptcy?
In a Chapter 7 Bankruptcy filing, the debtor petitions the court for an opportunity to receive an “Order of Discharge” that will release the debtor from his or her (or both in a joint filing) responsibility to repay most, if not all, their debts. Bankruptcy debtors, if they so choose and have the ability to pay, can keep property, such as homes, vehicles, and other things. The Bankruptcy Code also allows for liberal exemptions that are used to protect property that is needed for a functioning household. While the court, or more accurately the trustee in a case, can take property and liquidate it to pay creditors, such cases are rare in comparison to most.
Will I lose my home in a Chapter 7 Bankruptcy?
In a Chapter 7 filing, a debtor who is current on his or her home mortgage payment and has sufficient income to pay the mortgage payment would not lose their home unless they wanted to surrender it. Bankruptcy Code also allows for liberal exemptions that are used to protect property that is needed for a functioning household. The Federal Homestead Exemption is generally large enough to protect a home, but, if the debtor has more equity than the federal exemptions can protect, the debtor can choose the Arkansas Constitutional Exemption, which protects the homestead 100% in most cases.
What assets can I keep in a Chapter 7 Bankruptcy?
Even though Chapter 7 is the “liquidation” chapter, most Chapter 7 Bankruptcy cases do not end up with property being liquidated unless the debtor is ready and willing to lose that property. In those cases, a Chapter 13 can usually protect the property that is at risk in a Chapter 7 filing. Again, the Bankruptcy Code’s protections are usually sufficient to protect all property. But if a debtor has non-exempt, exposed property, they can arrange to either pay their trustee enough to cover the value of the property, or they can choose the property to surrender to the trustee.
Do I need a lawyer to file for Chapter 7 Bankruptcy?
You are not required by law to hire an attorney to file for Chapter 7 (or any type of) Bankruptcy. However, the Bankruptcy Code and the process of filing are very complicated. Debtors are required to provide certain documents and information, as well as to meet specific deadlines during the filing process. An attorney can help you navigate this process and avoid making any mistakes that could complicate or jeopardize your case.
How can Caddell Reynolds Law Firm help me?
Our firm has successfully helped thousands of people navigate some of the toughest, most challenging times in their lives. We not only understand the legal aspects of Bankruptcy but also the emotional side of crushing debt. Our goal is to not only help you effectively resolve your debts through all available legal means but also to find the relief you need.
At Caddell Reynolds Law Firm, our Arkansas Chapter 7 Bankruptcy lawyers work directly with each and every client, offering personalized attention, guidance, and counsel every step of the way. We can assist you in collecting and submitting all applicable documents, meeting critical deadlines, and working with the trustee and the Bankruptcy court in various proceedings. Our attorneys are well-versed in the many nuances involved in Chapter 7 filings and can guide you through the process while also working to eliminate your stress and provide you with the confidence you need to move forward toward a better financial future.
