What is Chapter 7 Bankruptcy?
What to Know about Chapter 7
Chapter 7 bankruptcy is intended to cancel most and sometimes all of your debts. Common nicknames for Chapter 7 bankruptcy include “straight” or “liquidation” bankruptcy, since your assets may be sold or liquidated as collateral to pay off your creditors.
A Chapter 7 bankruptcy divides your assets into exempt and non-exempt categories. How your assets are categorized depends on your income, financial situation, the type of asset and its value. If you’re unfamiliar with the bankruptcy code and your state’s exemption laws, you will benefit from having a bankruptcy attorney who can help protect as much of your property as possible. Without a good bankruptcy attorney by your side, even some exempt assets may be seized by creditors and sold.
Who qualifies for Chapter 7 Bankruptcy?
The list of debtors who can file for Chapter 7 bankruptcy includes individuals, partnerships, companies and corporations. Chapter 7 bankruptcy is available regardless of the amount of debt, solvency, or insolvency since the debtor's nonexempt assets will be sold and the money will be used to pay creditors.
Note, however that if your monthly income is more than your state’s median income, you will be subject to a "means test" to determine whether your Chapter 7 bankruptcy filing is abusive. You are presumed to be abusing the Chapter 7 bankruptcy filing if your combined monthly income is more than $11,725 over the last 5 years or if your combined monthly income is more than 25% of your nonpriority unsecured debt, as long as that amount is at least $7,025.
You may be unable to file for Chapter 7 bankruptcy if you received a bankruptcy discharge within the last six to eight years. However, depending on your current income, debt burden and expenses, you may be eligible to file for Chapter 13 bankruptcy instead. A bankruptcy lawyer can help you explore these options.
Talk to a Lawyer about Chapter 7 Bankruptcy
When filing for Chapter 7 bankruptcy, you have a long list of tasks ahead of you. There are many little details that can be misunderstood or accidentally skipped resulting in harsh penalties for your bankruptcy case. It’s important to get professional legal counsel from a qualified bankruptcy lawyer who understands Chapter 7 bankruptcy.