FILING CHAPTER 7 BANKRUPTCY

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If you’re considering filing for bankruptcy but don’t know where to start, you’re not alone. Understanding what Chapter 7 bankruptcy is and how it can help you find a path to financial freedom is the first step toward making an informed decision. At Henderson Bankruptcy Law, we’re here to make that process simple and clear.

What Is Chapter 7 Bankruptcy?

Chapter 7 bankruptcy, often called “liquidation bankruptcy,” is a legal process designed to help individuals eliminate most of their unsecured debt and get a fresh start financially. Unlike other types of bankruptcy, Chapter 7 is typically quicker and doesn’t involve a repayment plan. Instead, certain assets may be sold (or “liquidated”) to pay off a portion of your debt, but in many cases, people filing for Chapter 7 can keep most, if not all, of their property due to exemptions.

How Does Chapter 7 Work?

The process for filing Chapter 7 bankruptcy is straightforward:

1. Filing a Petition: You begin by filing a petition with the bankruptcy court in your area. This includes forms detailing your income, debts, assets, and financial history.

2. Automatic Stay: Once you file, an “automatic stay” goes into effect, stopping most collection activities immediately. This means creditors can no longer call you, send collection letters, or pursue lawsuits against you.

3. Trustee Assignment: A bankruptcy trustee is assigned to your case. Their job is to review your paperwork and manage any assets that might need to be sold.

4. Meeting of Creditors: About a month after filing, you’ll attend a meeting with the trustee and possibly your creditors, where you’ll answer questions about your finances and your filing.

5. Debt Discharge: If everything goes smoothly, you’ll receive a discharge of your eligible debts within a few months, officially clearing them from your record.

Eligibility for Chapter 7

To qualify for Chapter 7 bankruptcy, you must meet certain eligibility requirements:

- Means Test: Your income must be below the median income for your state, or you must pass a means test that compares your income and expenses to determine if you have enough disposable income to repay some of your debt.

- Prior Bankruptcies: You cannot have received a Chapter 7 discharge within the past eight years.

- Counseling Requirement: You must complete a credit counseling course from an approved provider within 180 days before filing.

What Types of Debt Are Included?

Chapter 7 bankruptcy can discharge a wide range of unsecured debts, including:

- Credit Card Debt

- Medical Bills

- Personal Loans

- Utility Bills

- Certain Court Judgments

However, not all debts can be discharged. Debts like child support, most student loans, certain taxes, and alimony obligations typically remain.

Secured vs. Unsecured Debt

Understanding the difference between secured and unsecured debt is key:

- Unsecured Debt: This is debt not tied to any collateral, such as credit cards and medical bills. Chapter 7 can often discharge most, if not all, of these types of debts.

- Secured Debt: This type of debt is tied to an asset, like a car loan or mortgage. While Chapter 7 can discharge your obligation to pay, the creditor can still repossess or foreclose on the property if you don’t continue making payments.

Many clients worry about losing their home or car, but there are exemptions available that often protect these essential assets.

Is Chapter 7 Right for You?

Filing for Chapter 7 can be a powerful tool to help you regain control of your finances and eliminate the stress of overwhelming debt. However, the process can be complex, and having an experienced bankruptcy attorney by your side can make all the difference. At Henderson Bankruptcy Law, we’ll guide you through each step, protect your rights, and ensure you get the most out of your filing. Our goal is to help you achieve a clean slate and peace of mind.

Ready to take the next step? Contact Henderson Bankruptcy Law today to schedule a free initial consultation and start your journey to financial freedom.