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Chapter 7 Critical Facts

  • By Arcadier, Biggie & Wood, PLLC
  • 136

Chapter 7 Bankruptcy Lawyer

Chapter 7 bankruptcy is a legal process designed to provide individuals with a fresh start by eliminating most of their unsecured debts. It’s important to have a clear understanding of this form of bankruptcy to make informed decisions and it can be even more critical to work with a knowledgeable Chapter 7 bankruptcy lawyer, such as a lawyer at Therman Law Offices, LTD. Legal professionals will guide you through the legal requirements, help you understand the potential consequences and benefits, and ensure that you navigate the process successfully. You shouldn’t have to navigate bankruptcy on your own, and you can make the right confident decisions for yourself with a lawyer by your side. In the meantime, here are five important facts to know about Chapter 7 bankruptcy:

Eligibility Requirements

Not everyone is eligible for Chapter 7 bankruptcy. To qualify, you must meet specific criteria, including passing the means test. The means test compares your average monthly income to the median income in your state. If your income is below the median, you generally qualify for Chapter 7. If your income exceeds the median, further calculations are done to determine eligibility. Additionally, individuals who have received a Chapter 7 discharge within the past eight years or a Chapter 13 discharge within the past six years may have restrictions on filing for Chapter 7.

Automatic Stay

Once you file for Chapter 7 bankruptcy, an automatic stay goes into effect. This means that creditors are legally prohibited from taking any collection actions against you. The automatic stay halts lawsuits, wage garnishments, foreclosure proceedings, and creditor harassment. It provides you with immediate relief and allows you to regain control of your finances. However, certain types of debts, such as child support, alimony, and most tax obligations, are not affected by the automatic stay.

Liquidation of Assets

In Chapter 7 bankruptcy, a bankruptcy trustee is appointed to review your assets and determine if any non-exempt property can be sold to repay your debts. However, many individuals who file for Chapter 7 bankruptcy are eligible for exemptions that protect essential assets, such as your home, car, household goods, and retirement accounts. State and federal laws govern these exemptions, and they vary depending on your jurisdiction. It’s crucial to consult with a bankruptcy attorney to understand the exemptions applicable to your situation.

Discharge of Debts

A primary benefit of Chapter 7 bankruptcy is the discharge of qualifying debts. A discharge releases you from personal liability for those debts, meaning you are no longer legally obligated to repay them. Credit card debt, medical bills, personal loans, and certain other unsecured debts are generally eligible for discharge. However, some debts are non-dischargeable, including certain taxes, student loans (in most cases), child support, and alimony. It’s important to consult with an attorney to understand which debts can and cannot be discharged in your case.

Credit Impact

Filing for Chapter 7 bankruptcy will have a significant impact on your credit score and credit history. It will remain on your credit report for up to ten years. However, it’s essential to recognize that rebuilding your credit is possible after bankruptcy. Taking steps to demonstrate responsible financial behavior, such as paying bills on time, establishing a budget, and obtaining secured credit cards, can help you gradually rebuild your creditworthiness.

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