What is Chapter 7 Bankruptcy?
A Chapter 7 bankruptcy case is intended to give you a fresh start by discharging (eliminating your legal obligation to pay) your unsecured debt. Unsecured debts consist of credit cards, medical bills, unsecured loans, amounts due on vehicles that were returned or repossessed, rent and other fees from an apartment you lived at in the past, and personal loans. This is not an exhaustive list of unsecured debt, but should give you an idea of the types of debt that can be discharged in a Chapter 7 bankruptcy case. Debts that generally cannot be discharged include domestic support obligations (child support and alimony), student loans, and tax debt. A Chapter 7 case will stop garnishments of your wages and bank accounts and prevent creditors from taking any action against you to collect.
Is Chapter 7 Right for Me?
There are several things to consider when determining if a Chapter 7 bankruptcy case is the right way to go for you. First, you need to determine whether Chapter 7 will accomplish your objectives when filing for bankruptcy. If you are overwhelmed by credit card debt, medical bills, or personal loans, then you should consider filing a Chapter 7 case. If you are behind on mortgage, rent, or car payments and you want to remain in the residence or keep your car, then you probably need to look at a Chapter 13 case rather than a Chapter 7 case. A Chapter 7 case deals primarily with your unsecured debt and you should be current, or be able to get current shortly after filing, on your payments to secured creditors if you want to keep the property. If you are interested in surrendering the property and want to prevent the creditor from pursuing you for any deficiency between what you owe and what they are able to sell the property for, then a Chapter 7 may be the right option for you.
Will I Qualify for a Chapter 7?
If Chapter 7 will accomplish the objective you have for filing bankruptcy, you then need to determine if you qualify for a Chapter 7 from an income standpoint. If your annual gross household income is below the median income for a household of your size in the State of Georgia, you will qualify for a Chapter 7 bankruptcy case. You can go here to see if your annual gross household income is above or below the median income.
If your gross household income is above the median income, that does not necessarily mean you do not qualify for a Chapter 7 bankruptcy case. You will have to complete a means test which looks at your average monthly household income for the past six months and applies allowable IRS deductions. If, based on the means test, you have very little or no disposable income at the end of the month, then you will qualify for a Chapter 7. A common misconception is that you only have to report the income of the individual filing for bankruptcy and not the income for a spouse or other family members. Bankruptcy code requires that you report the total household income and your attorney will ask you for proof of the household income. This may mean you will need to get paystubs from a non-filing spouse or child.
What are Bankruptcy Exemptions?
The third thing you need to consider when determining whether a Chapter 7 bankruptcy case is the right way to go for you is whether you have any assets that the Trustee might want to liquidate to pay your creditors. Technically, a Chapter 7 bankruptcy case is a liquidation of your assets and a discharge of your unsecured debts. There are exemptions that are available to you to protect a certain amount of equity in property so you may not have to surrender any of your property when filing a Chapter 7 bankruptcy case. Bankruptcy exemptions can be complicated so it is advisable to have an attorney assist you in determining whether you have a potential equity issue in filing a Chapter 7 case. If you file by yourself (pro-se) and get it wrong, you may end up losing your home, family property, or vehicle. In addition to making sure you don’t have any equity in property that cannot be exempted, you also need to make sure you have not transferred any property in the past that might allow the Trustee to reverse the transfer and liquidate the property. The Trustee’s powers to reach back and undo transfers of property are extensive. The Trustee has the ability to “step into the shoes of a creditor” and use any applicable non-bankruptcy law to reach back and undo property transfers. Getting an experienced bankruptcy attorney to advise you regarding property transfers could save you from losing property you transferred many years ago.
How Will a Chapter 7 Protect Me?
When you file a Chapter 7 case, an automatic stay goes into effect that prevents any creditor from taking collection action against you. The duration of the automatic stay will generally extend for the duration of the case, unless you have had prior cases dismissed within the past 12 months or you are surrendering property. The Chapter 7 case will stop any garnishments, pending civil litigation to collect on a debt, evictions (if the case is filed prior to the landlord obtaining a judgment for possession), repossessions, or foreclosures. Since a Chapter 7 case does not propose to pay back any arrears on apartment rent, homes, or vehicles, you should be prepared to surrender the property shortly after you file the bankruptcy case unless you can work something out with the creditor. The amount of time you have will depend on how aggressive the creditor is in retrieving the property.
Will I Get to Keep My Property?
If you file a Chapter 7 case and would like to retain property for which you are making payments, the creditor may request that you sign a reaffirmation agreement with respect to that property. The reaffirmation agreement essentially “puts you back on the hook for the debt” because you are indicating to the creditor that you would like to keep the property and continue to make the payments.
There are pros and cons to executing a reaffirmation agreement with a creditor. If you execute a reaffirmation agreement, the creditor will report your payments to the credit reporting agencies so it will help build up your credit score, assuming you remain current on the payments. If you would like to refinance the debt in the future, the creditor will likely work with you to refinance the debt if you qualify. However, if you get into trouble with the payments in the future and would like to surrender the property, the creditor can pursue you for any deficiency. If you do not sign a reaffirmation agreement, the creditor is not likely to take the property assuming you remain current on the payments; however, they may not report your payments to the credit reporting agencies and may not work with you in the future if you would like to refinance the property. On the other hand, if you do not sign a reaffirmation agreement and you decide in the future that you would like to surrender the property, the creditor cannot pursue you for any deficiency.
How Can Burrow and Associates Help Me?
Chapter 7 was created to give financially exhausted individuals and families the ability to have a fresh financial start. If you believe you would like to file a Chapter 7 bankruptcy case, you should contact an experienced bankruptcy attorney to assist you. Our bankruptcy lawyers have filed more than 14,000 bankruptcy cases since 1996 and will help you overcome the emotional and financial burden of debt by applying our extensive knowledge of the bankruptcy process. Our firm offers a free consultation, so you can get your questions answered to determine if Chapter 7 is right for you.
How Much are Chapter 7 Bankruptcy Fees?
The filing fee for a Chapter 7 is $358.00 which includes the court cost of $335.00, the credit counseling course that everyone must take when they file a bankruptcy case and we pull your credit report from the credit reporting agencies. The attorney fees in a Chapter 7 vary depending on the complexity of your case but you can expect to pay approximately $1,500.00. We offer a payment plan, so you can spread the payments out to make them affordable for you.
To find out if we can assist you in the bankruptcy process, contact Burrow & Associates. Give us a call at (678) 323-2394 or request a consultation today. We are conveniently located in cities around the state of Georgia including Athens, Conyers, Duluth, Morrow and Kennesaw.