Chapter 7 Bankruptcy
Chapter 7 Bankruptcy
There are a lot of myths about Chapter 7 bankruptcy, leading some to believe that you don’t qualify at certain income levels or you’ll lose all your assets. One of the worst misconceptions is that Chapter 7 will permanently leave your financial status in ruins. Unfortunately, many of these falsehoods could lead you to make even bigger mistakes, like trying to handle insurmountable debt on your own. However, by speaking with a Chapter 7 bankruptcy lawyer early on, you can get accurate legal help, genuinely resolve your financial issues, and avoid some severe complications.
At Arenstein & Andersen Co., LPA, we know that putting your financial future in our hands requires trust. With decades of legal experience and a reputation for being relatable, responsive, and highly effective, our personal bankruptcy services could be the answer to your financial troubles, and we’re ready to earn your confidence. Depending on your circumstances, a Chapter 7 filing could discharge much of the debt that is weighing you down, but the first step is contacting a knowledgeable bankruptcy lawyer. Additionally, if your business is involved, our litigation attorneys may be able to assist in filing a corporate Chapter 7 bankruptcy.
Let us determine if Chapter 7 is a good fit for you. Our attorneys in Dublin, Ohio and Tipp City, Ohio are ready to get to know you and tailor a plan based on your unique financial circumstances. Schedule a free bankruptcy consultation today by calling (614) 602-6550 or submit a request online.
How Chapter 7 Bankruptcy Works
Although you can emerge with a clean slate after a Chapter 7 bankruptcy filing, the option is not for everyone. Chapter 7 of the U.S. Bankruptcy Code is aptly named “Liquidation,” because it allows eligible individuals to eliminate their debt after relinquishing non-exempt assets to satisfy creditors.
You should consult with our Chapter 7 bankruptcy lawyers if:
- You are willing to liquidate some of your assets to pay your debts;
- Your income is below Ohio’s median or meets the “means test;”
- You’re ready to undergo credit counseling; and,
- You meet other requirements that depend on your circumstances.
It is also important to note that the clean slate that Chapter 7 offers doesn’t mean that it is consequence-free. Your credit report will reflect a Chapter 7 bankruptcy, which means you may face challenges getting a mortgage, an auto loan, or line of credit for several years after the discharge. Still, many petitioners find that the advantages outweigh the drawbacks. For example, there’s an automatic stay on creditors trying to get payment from you. They cannot foreclose on your home, or garnish wages and bank accounts.
Plus, Chapter 7 removes the stress of living with significant debt off your shoulders. After a Chapter 7 filing, you are more likely to live within your means and prevent future financial catastrophes, especially with the tools you learn after credit counseling.
Chapter 7 Eligibility Rules
At the core of Chapter 7 eligibility is your income, as it’s not the intent of the U.S. Bankruptcy Code to allow high-earners to discharge their debt. Prior to filing, your bankruptcy lawyer will compare your current monthly income to the state median in Ohio for your household size. If your income falls below this amount, you meet the income test and qualify for Chapter 7.
However, you’re still eligible if your income is above the state median, so long as you meet the “means test.” The formula also starts with your current monthly income and deducts certain monthly expenses, such as rent, mortgage, food, and designated necessities. This amount is your disposable income and, if it’s high enough to allow you to pay off some creditors, you may not qualify for Chapter 7. If that’s the case, your best strategy may be filing through the Chapter 13 bankruptcy repayment plan.
Other circumstances that affect eligibility may include:
- You went through bankruptcy proceedings within the last six years;
- You filed for bankruptcy in the last six months, and the case was dismissed, either through your misconduct or your own request; or,
- There’s evidence that you attempted to defraud creditors before filing.
The Chapter 7 Bankruptcy Process
Once you complete the mandatory credit counseling session, there are four basic steps to Chapter 7 bankruptcy.
- File Your Bankruptcy Forms: Chapter 7 starts when you complete the necessary forms and supply the required documents, including a list of your assets, your creditors, what you owe, and any major financial transactions over the last two years. From this point forward, you’re prohibited from selling or giving away any assets.
You’ll also need to submit your income tax returns and any documents requested by the bankruptcy trustee. The trustee is a court official that’s in charge of the bankruptcy process, tasked with reviewing your documents and determining what non-exempt assets may be sold to pay off your creditors.
Exempt property, which cannot be applied to satisfy your debt, may include:
- Your residence, up to a certain value;
- Some types of personal property;
- A percentage of your wages;
- Certain pensions; and,
- Other designated items.
Determining what assets are exempt versus non-exempt can be complex. You should consult with a Chapter 7 bankruptcy attorney regarding an appropriate strategy under the rules.
- Attend a Chapter 7 Creditors Meeting: Within a short time after filing, you must attend a creditors meeting regarding the information you’ve provided to the court. The bankruptcy trustee oversees the meeting and will ask you questions that you’ll answer under oath. This is usually the only official hearing you’ll need to attend, as our Chapter 7 bankruptcy lawyers will manage the remainder of the process.
- Await a Determination Regarding the Creditors Meeting: The bankruptcy trustee will once again review your forms, supporting documents, and the proceedings at the creditors meeting. Any non-exempt property will be ordered sold, so you must surrender it to the court. However, in many cases, the value of personal items doesn’t justify the process of trying to sell it to satisfy debts. This means that, even though officially non-exempt, you’ll be allowed to keep some assets.
- Receive the Official Chapter 7 Discharge Order: Approximately three to four months after the meeting of creditors, you can expect to receive a written order from the bankruptcy court. This formally classifies your debts as discharged, meaning that you owe nothing more to your creditors. A Chapter 7 bankruptcy can remain on your credit history for up to 10 years, but you’re debt-free and can start developing smart, sensible financial habits.
Discuss Your Options with Our Experienced Chapter 7 Bankruptcy Lawyers
Chapter 7 bankruptcy may offer you the fresh start you need, but it’s important that you know what to expect during the process and after your case concludes. At Arenstein & Andersen Co., LPA, our lawyers in Dublin, OH and Tipp City, OH take a lot of pride in helping people overcome their financial troubles. We will explain the laws, advise about all your options, and develop a plan that best suits your needs. We’re ready to put our decades of experience and passion for giving people the legal help they deserve to work for you.