Chapter 7 Bankruptcy
What Are the Benefits of Chapter 7 Bankruptcy in Louisville Kentucky?
The advantage to a Louisville Kentucky Chapter 7 bankruptcy is it is quick and inexpensive. 97% of clients qualify for a Chapter 7. The process is over in about 4 months while a Chapter 13 takes 3-5 years. No payments are made to the court. In well over 95% of the cases no property is lost. The collection calls stop immediately. Within 7 - 10 days after filing you and the creditors receive a notice of the place and time of the 341 hearing that is about 4 - 6 weeks after filing.
A Chapter 7 is best for persons that have little equity in their home or cars, average or below average income and a majority of unsecured debt. A Chapter 13 is often required if you need to manage a foreclosure, tax or student loan debt. We have a free consultation for Kentucky and Southern Indiana clients.
Means Test Qualifications
Consumer debtors have to qualify for a chapter 7 under the means test. Debtors must have little or no disposable income for a Chapter 13 payment after the deduction of reasonable and necessary expenses. But a debtor can also qualify for a chapter 7 if over 50% of his debt is from a business. You can have a high income and qualify if you owe more than the debt limits for a Chapter 13 which is $1,010,650 in secured debt, or $336,900 in unsecured debt.
If you cannot afford a Chapter 13 repayment, after reasonable and necessary expenses are deducted, and all of your property is exempt, a Chapter 7 may be your best choice. Most Chapter 7 bankruptcy cases repay nothing to the lenders and in over 95% of the cases people lose nothing by filing a Chapter 7.
Chapter 7 restrictions
The major restriction to a Chapter 7 is that it can only be filed once every 8 years and only temporarily stalls a foreclosure. If you have filed a Bankruptcy previously please refer to the Chapter 7 and Chapter 13 time chart for re-filing and tell your attorney.
Chapter 7 has a very high success ratio. Chapter 13 cases often have to be converted to a Chapter 7 later after a debtor losses income due to death, disability or divorce. A Chapter 7 will only temporarily delay a foreclosure about 6 months. A Chapter 13 can cure the foreclosure.
Chapter 7 Costs and Requirements
Chapter 7 bankruptcy in Louisville is a much cheaper option than a Chapter 13. The debtor pays an upfront but much smaller attorney fee. In Louisville the average Chapter 7 costs about $1,200 for a single person and $1,400 for a couple in attorney fees. Attorney fees for a Chapter 7 bankruptcy should be about equal to the cost of an average new refrigerator.
The attorney fees in a Chapter 13 are set and paid by the Court so you should always seek the best attorney in town. The cost to you in a Chapter 13 is the same for the best attorney in town or the worst. To maintain quality we only do about 15 cases or less a month. Some offices will do 100 cases a month and cases are prepared by a secretary or paralegal. I personally prepare all my clients cases.
There is a 335 filing fee and a short class which must be taken before and after the case is filed. Always remember to take the second class. If you fail to take the second class, the case will close without a discharge and creditors will be able to start collections all over again. You can reopen the case and file the Debtor Education certificate after the case closes. But you would have to pay a second filing fee and about 300 in additional attorney fees for the additional work to file motions to reopen the case and submit the certificate.
The Bankruptcy Stay
As soon as the case is filed a temporary federal court order called a stay is issued to stop any collection activity. At the end of the case a Debtor earns the permanent court order called a discharge. If an item is secured, your overdue payments will continue to add up if you don’t pay on the item. However, the creditor can’t take the collateral until the stay is terminated. The stay terminates when the case closes or a motion to terminate the stay is granted.
You normally continue to repay for a home or a car that you wish to keep after filing a Chapter 7. But occasionally the cost or interest rate of the home or auto loan is too high. A Chapter 7 may allow you to strip a judicial lien that was placed on your home by a judgment or recover property that was taken. But a Chapter 7 does not allow you the ability to lower your interest rate for a car or eliminate a second mortgage that has no equity like a Chapter 13 does. In a Chapter 7 you may want to negotiate a better term with a creditor to keep the property in a Reaffirmation agreement or motion to redeem a car.
Keeping property in a Louisville Kentucky Chapter 7 bankruptcy
In order to keep from losing property to the trustee there must be less equity in the property than what the exemptions are. In Kentucky the exemptions for a home, car, and other property are large. Kentucky uses the federal exemptions. Property is rarely lost to the Court and Trustee when you file bankruptcy. Other states such as Indiana have smaller exemptions than Kentucky. Some states like Florida and Texas have much larger exemptions.
To keep a car you may have to either reaffirm or redeem the auto. A Reaffirmation is an agreement to continue paying a secured loan. Signing a reaffirmation will make you responsible for the loan if it is foreclosed or repossessed later. The lender may agree to lower the interest rate, amount owed or payments in the reaffirmation. A Redemption is a lump sum purchase of the collateral. The stay automatically terminates if no reaffirmation or motion to redeem is filed within 45 days after the bankruptcy is filed. The bank can then take the car. The creditor may also file a motion to terminate the stay after the bankruptcy is filed. Bankruptcy stops your obligation to pay, but the creditor still has a lien and rights in the property. A Chapter 7 can strip a judgment lien and affect the liens of some Creditors. When you are ready to file or if you have questions come see us.