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Benefits of a Chapter 7

Chapter 7 Bankruptcy Benefits Louisville Kentucky

One of the basic Chapter 7 Bankruptcy Benefits is a federal court order.  When you file a Chapter 7, an “automatic stay” is put into place. Chapter 7 puts a stop to all collections attempts, lawsuits, wage garnishments, and other forms of contact from creditors. It is so effective I have people report they pick up phones to see if they still worked. Even IRS garnishments, foreclosures, and student loan interceptions stop.

If the debtor properly completes the Chapter 7, he obtains the permanent “discharge” court order which permanently stops collections.   Getting the Chapter 7 permanent order usually only requires that you complete the Debtor Education, turn over the documents, prepare the petition properly and attend the 341 meeting.   The Chapter 7 usually only takes 4-5 months to complete.   But the discharge benefits is permanent.  Nothing I can think of will gives you a proper budget you can afford more quickly, cheaply and effectively. You discard the debts you can’t afford and don’t need, and you keep the items you can afford.

The Chapter 7 is quick, cheaper than filing a Chapter 13 and has most of the benefits.  The primary advantage it doesn’t have is that you cant strip a second mortgage in Chapter 7 at this time and it does not permanently stop a foreclosure.   There is little or no difference in the effect on your credit or how complete the Chapter 7 and Chapter 13 discharge is.  You get the Chapter 7 finished in 4 months.  Chapter 7 is much quicker to repair your credit than waiting five years in a Chapter 13 to start over.

Chapter 7 Disadvantages

Although attorney fees must be paid before filing a Chapter 7 ( about $1200 singe $1400 joint), it is about one third of the cost of Chapter 13 ( Standard no look fees are $3500-  $4000).  However, Chapter 13 fees are paid over time and taken from what you would have paid to the unsecured creditors.  Chapter 13 can be filed immediately after a Chapter 7, but you must wait eight years between Chapter 7 discharges.

Some debts are non-dischargeable in Chapter 7.  The majority or all credit cards, medical bills, and personal loans are discharged. This means companies which held these debts cannot legally ask you to pay these debts after the case is discharged.   You have no legal responsibility to repay the debt. However, if the company held a mortgage or car lien, the security interest they held might still be good. Some judicial liens or financed items can have security interests stripped away in Chapter 7.

Debts such as alimony, child support, income tax debts less than three years old and some student loans are generally not discharged.  It is important to know the exceptions. Some of these debts are discharged anyway. If the bankruptcy is planned correctly, even income taxes or some rare types of student loans are dischargeable.

What is a Chapter 7 Bankruptcy

In a Chapter 7 bankruptcy, your property technically belongs to the trustee until after he abandons his interest in the property.   The exemption laws allow you a considerable amount of property to start over.   In Chapter 13, property remains in possession of the debtor, and a Chapter 13 bankruptcy is voluntary meaning you can dismiss the case if you wish.

If you file a Chapter 7 a dismissal of the bankruptcy must have approval from the court and the trustee who has all of the powers of a creditor with a judgment lien.   Very few people ever lose anything they don’t wish to lose in a Chapter 7 bankruptcy because of large exemptions you have to keep property and the ability you have to plan before you file.

We help our clients keep critical items like cars and homes. The problem is rarely losing the property. Instead, the problem is that you have to qualify for a Chapter 7.

Means Testing

The means test looks at income and your reasonable and necessary expenses to determine whether you can repay debts in Chapter 13. If your income is below the average income for your size family, we presume you may file a Chapter 7. We deduct for reasonable and necessary expenses when your income is above the average income for your size family.  If there is no meaningful amount left over to make a Chapter 13 payment you still will qualify for a Chapter 7.   The means test for a Chapter 7, however, is very complicated.

The court also looks for other financial information such as borrowing just before filing and paying money or transferring property. Transfers to friends and family are closely looked at. Many questions are asked in the statement of financial affairs to discover these transfers and are easily discovered in the tax returns and bank statements you have to turn over. We help you qualify for the exemptions and look over these considerations in preparing the petition.   Call me at (625-0905) for a free bankruptcy consultation or my paralegal at 0903 to schedule your appointment.

Attorneys make filing easier and more effective

Less than 1 percent of the people in America file bankruptcy every year.   But sooner or later the majority of the people file. Many of our presidents have filed. The process for attorneys to prepare the petition is complicated and difficult.  The process of preparing a petition is so hard that after the law changed in 2005, about half of the attorneys quit filing bankruptcy cases. A study in California shows when people try to file a Chapter 13 without an attorney 99% of the cases are dismissed. Of the 1% that remains very few are happy with the result.  But we try to make it simple.  Call me at (625-0905) for a free bankruptcy consultation or my paralegal at 0903 to schedule your appointment.