What Is Chapter 7?
Chapter 7 is the most commonly filed type of bankruptcy. It can help you eliminate most unsecured debt (such as credit cards and medical bills). In Chapter 7, you file and eliminate all unsecured debt; you do not pay creditors or the trustee. Your secured debt stays (house, car, etc.), and you must be current on payments and agree to continue to make them during and after Chapter 7 because if you don't pay, you can't keep them.
If your car was repossessed and sold at auction, you still owe the difference between the auction price and the remaining loan amount. This type of debt is dischargeable. The same is true if your house was foreclosed. Some debts, however, are not allowed to be discharged. Most back taxes to the IRS, most student loans, and child support cannot be removed.
To file for Chapter 7, you have to meet with bankruptcy professional who will go over the last six months of debt to see if you qualify. One requirement is that you make below the median income in your geographic area for your family size. In DFW, a single person with no dependents can make $35,000 to $40,000 per year and still qualify for Chapter 7. Eligibility depends on the number of cars one has, the number of people in the household, and one's secured debt.
The good news is that 99 percent of individuals who file Chapter 7 bankruptcy get to keep everything because of exemptions under federal and state codes. An experienced attorney can give advice and let you know what you can keep. The average person with a house, cars, a retirement account, and household goods can keep and protect all items. Only significant assets will be taken, such as a second house, assets in stocks, etc. A board certified bankruptcy professional can review all of your assets and tell you what you can exempt and protect. Do not let the fear losing property keep you from filing.
To file for Chapter 7, fill out the schedules (your attorney will help), list your assets and creditors, discuss your current household income, and complete out the means test. A bankruptcy attorney will ensure that you complete the paperwork correctly.
What Is the Difference between Chapter 7 and Chapter 13?
The two common types of bankruptcy for people (not businesses) are Chapter 7 and Chapter 13. Both help you remove the financial strains of creditor harassment, foreclosure, and the embarrassment of not being able to pay your bills while giving you the ability to put food on the table, clothe your children, and get a fresh start.
An experienced bankruptcy attorney can help you decide which chapter you should file under based on your personal situation. Don't try to do this on your own; it's a fairly complicated process. It is not shameful to file for bankruptcy-if you are in a situation in which some unexpected hard times have put you behind on payments on property you want to keep, Chapter 13 can help you catch up on payments and keep your property.
