Frequently Asked Questions About Chapter 7 Bankruptcy
If you are burdened by debt problems, you may be considering Chapter 7 bankruptcy to give you the fresh start you need. As Philadelphia bankruptcy attorneys, every day we answer a wide range of questions about the ins and outs of Chapter 7 bankruptcy. Below we answer some of the most frequently asked questions about Chapter 7 bankruptcy that we hear.
Q: What is Chapter 7 bankruptcy?
A: The most common form of bankruptcy, Chapter 7 provides a way to get a “fresh start” through the federal bankruptcy laws that allow an individual to keep some property and other assets up to certain limits. Property above those limits is sold to pay the debts, and creditors often get a small fraction of their debt or nothing at all.
Q: How do I know if I am eligible to file a Chapter 7 bankruptcy?
A: To determine if you are eligible for Chapter 7, the law uses a “Means Test” demonstrating that you legitimately do not have the income or means to pay back your debts. To give you an idea of what that might look like today, a single-person household in Pennsylvania would need to make less than $4222.25 per month, while a four-person household would need to be under $7803.75 per month. The law uses a very broad definition of the word “income,” which goes well beyond your simple take-home paycheck, and the limits are adjusted quarterly.
Q: What happens after you file a Chapter 7 bankruptcy?
A: After filing a Chapter 7 bankruptcy your unsecured debts are discharged – or eliminated. Debts that are dischargeable include medical bills, credit card debt and lines of credit. Not all types of debts are can be discharged under Chapter 7, such as student loans, outstanding child support or alimony obligations, tax bills, and criminal fines. Those debts are considered non-dischargeable and arrangements to satisfy those debts will have to be made.
Q: How long does a Chapter 7 bankruptcy take?
A: Once you file a petition for Chapter 7 bankruptcy with the bankruptcy court, the time frame could be as quick as 3 to 4 months for your debts to be discharged. If you have substantial assets that can be taken as payment for some of the debts you owe, it may take longer.
Q: Can you file for Chapter 7 bankruptcy and keep your house?
A: One of the most frequently asked questions about Chapter & bankruptcy we hear is about homes. The good news is, when people file for Chapter 7 bankruptcy, they may possibly keep their house and get protection from creditors through an exemption. Federal and state laws establish the exemptions, but in general, bankruptcy law provides exemptions that allow a limited amount of equity in a primary residence known as the homestead exemption. If the equity in your home exceeds the allowed exemption amount, the court may require you to pay some of the debt.
As an example, if your home has a market value of $200,000 and you have a mortgage balance of $175,000, then you have a $25,000 of equity Under the current federal bankruptcy exemptions, the Homestead exemption amount allowed is $25,150. In this example, your home would be safe in a Chapter 7 bankruptcy.
Q: If I file for Chapter 7 bankruptcy will I be able to keep my car?
A: If you file for Chapter 7 bankruptcy you do not have to lose your car. A number of options exist to address keeping your vehicle. If you own your car free of any liens, claiming the value of the car as exempt is required in the bankruptcy process. Failing to do so can result in the bankruptcy trustee requiring the sale of your car.
If you have a loan securing your vehicle, you can ask the bankruptcy court to approve a Reaffirmation Agreement with the lender to keep the car loan out of your bankruptcy. If the current value of the vehicle is lower than the balance owed on the car loan, filing a Motion to Redeem may be an option. This allows you to pay off the vehicle loan based on the car’s retail amount at the time of the bankruptcy filing.
Q: Will my creditors stop harassing me if I file for bankruptcy?
A: If you hire a bankruptcy attorney to file a Chapter 7 bankruptcy, you can tell your creditors to contact your lawyer. Once your attorney files your bankruptcy petition, creditors will be notified and will not allowed to contact you without receiving permission of the bankruptcy court.
Q: How long does a bankruptcy stay on my credit report?
A: After completing a Chapter 7 bankruptcy filing, the bankruptcy will show on your credit report for up to ten years. The credit reporting agencies should automatically remove the bankruptcy after 10 years but the event impacts your credit less as time passes and as you add positive information to your credit report.
Q: Can Chapter 7 bankruptcy discharge any student loans?
A: Student loan debts are debts that are very rarely be discharged through bankruptcy. Students receive many benefits from educational loans, including expanded forbearance, deferment, and favorable repayment options. Education loans follow a debtor until they pass away, pay them off, or the debts are forgiven.
Get Advice and Answers to Your Frequently Asked Questions about Chapter 7 From A Philadelphia Bankruptcy Lawyer
Bankruptcy can be intimidating, but upon completion, you will have the fresh start you need. Your debts will be discharged or reorganized, and you will have the relief of knowing that your finances are back under control.
For more specific answers than we have in our list of frequently asked questions about Chapter 7 bankruptcy, contact us. Our experienced bankruptcy lawyers are dedicated to helping people overcome difficult financial situations and achieve the peace of mind that comes with debt relief.
You DO have options. Call Alfred Abel Law Offices today at 215.517.8300 or contact our bankruptcy firm online.