Chapter 7 Bankruptcy
What is Chapter 7?
Known widely as "liquidation" or "straight bankruptcy",
Chapter 7 bankruptcy provides filers with protection from their creditors
and relief from many of the debts that have overwhelmed and burdened them.
It will allow you to clear most of your outstanding debts quickly and
get a fresh start in your financial life.
To qualify for a Chapter 7 bankruptcy you must make less than the median
income for people in your area. If your income is above the median income
level in your area, you may still be eligible for Chapter 7 protections,
but you will have to undergo a means test to determine how much disposable
income you have.
To determine this, your monthly expenses for rent, utilities and payments
on items not included in the bankruptcy will be deducted from your monthly
income. Your disposable income is then multiplied by 60 to see how much
money would be available to pay your unsecured creditors over a five year
period. If this total is $10,000 or more, you will not be eligible for
Chapter 7 bankruptcy and will be required to enter into a
Chapter 13 bankruptcy repayment plan. If your disposable income totals less than
$10,000 in a five year period, there is still more to the means test.
If your disposable income is $100 a month or more, and the total over
the five-year period is equal to 25 percent of your unsecured debt included
in the bankruptcy, you will be required to file a Chapter 13 bankruptcy.
If your disposable income is less than $100 a month, you will qualify
for Chapter 7 bankruptcy protection.
Under Chapter 7 bankruptcy, you will have the ability to keep all of your
exempt assets. Exempt items differ from state to state. Generally they
will include retirement savings in approved pension, 401k and individual
retirement accounts (IRA). They often include a homestead, vehicle and
personal items. Speak to your Price Law Group bankruptcy attorney about
which assets are protected under the bankruptcy laws in your state.
Some debts are not eligible for discharge in bankruptcy. Child support
payments, student loans and most tax debt will not be discharged in bankruptcy.