Do you have bills that you can’t afford to pay? Maybe you have recently gotten divorced, lost a job, or had a medical emergency, or maybe your monthly expenses are so high that your credit card bills have gotten out of control. Are you wondering what your options are?
For many people in situations like yours, filing Chapter 7 bankruptcy is a way to get meaningful debt relief and start over with a clean financial slate.
We help Nebraska and Iowa clients understand their options and help them file bankruptcy if they choose to do so. We are here to serve as your educator and your advocate.
What is Chapter 7 Bankruptcy?
The Chapter 7 process is what many people think of as traditional consumer bankruptcy. It allows you to discharge (permanently eliminate) certain types of debt, particularly credit card debt and medical bills. In return for the discharge of your debts, you may have to give up certain assets, which can be liquidated (sold off) by the bankruptcy court to partially repay your creditors.
Many types of personal assets are exempt from liquidation in Chapter 7. Most people who file Chapter 7 are able to complete the bankruptcy process without giving up any assets.
We will carefully evaluate your personal circumstances to determine whether you would be required to give up your house, car or any other assets in order to get Chapter 7 debt relief. If so, we can help you consider whether Chapter 13 reorganization of your debts is a better option.
Do I qualify for Chapter 7 bankruptcy?
The federal bankruptcy law adopted in 2005 set new qualifications for Chapter 7 bankruptcy. There is now a “means test”, which is based on your income and the size of your family. The means test attempts to screen out people who can afford to at least partially repay their debts.
Since the means test is designed to keep high wage earners from filing for Chapter 7 bankruptcy, it is generally not an issue for most people who are considering bankruptcy, because they genuinely cannot afford to pay their bills.
As experienced bankruptcy lawyers, we can help you figure out if you qualify for Chapter 7 filing and if it is in the best interest for you and your family.
Contact us to speak to one of our experienced bankruptcy lawyers or to arrange a free initial consultation. If you cannot come to our Omaha offices, we can consult with you by telephone.
How Much Debt Should you Have to File Chapter 7?
There is no minimum amount of debt for filing a Chapter 7 bankruptcy, but there is a maximum amount of debt that can be discharged. To qualify for Chapter 7, you can’t have more than $1,257,850 in secured debt or $419,275 in unsecured debt.
What debts are removed in Chapter 7 Bankruptcy?
Chapter 7 bankruptcy removes most types of unsecured debt such as:
- Credit card debt
- Medical bills
- Personal loans not tied to an asset
- Obligations for leases and contracts
- Even lawsuit judgements against you
What Debts are Not Removed in Chapter 7?
Chapter 7 bankruptcy does not discharge (or remove) all debts. Debts that are excluded include things like:
- Child support
- Alimony payments
- Fines
- Penalties
- Certain tax debts
- Fees for HOAs or condos
- Retirement account loans
- Debts you could not discharge in an earlier bankruptcy
How Long Does Chapter 7 Bankruptcy Take?
The entire Chapter 7 bankruptcy process takes about three to six months.
Do I Need an Attorney to File Chapter 7?
No, you are not required to have an attorney, however, know there are risks associated with going it alone. Bankruptcy law can be very confusing and court employees cannot provide guidance or offer legal advice.
This is why your bankruptcy lawyer is important. An attorney can educate you on the process, help you determine which type of bankruptcy is best for your unique situation, answer questions about the law or process, help you complete the necessary forms and paperwork, and explain any tax implications that result from the Chapter 7 proceedings.
What is the Difference Between Chapter 7 and Chapter 13 Bankruptcy?
In the simplest terms, Chapter 7 removes debt (not all debt) and lets you start fresh, where Chapter 13 reorganizes your debt and gives you time to catch up on missed or late payments. Both Chapter 7 and 13 have their benefits and drawbacks.
As your bankruptcy lawyer, it is my job to discuss both options with you and figure out which route (if any) would be best for your specific situation.
What is the Difference Between Chapter 7 and Chapter 11 Bankruptcy?
Chapter 11 is rarely used by individuals and it is much more complex than Chapter 7. Like Chapter 13 bankruptcy, Chapter 11 is a reorganization of debt. It does not liquidate your assets and remove debt like Chapter 7. Instead Chapter 11 provides an opportunity to negotiate with your creditors to modify the terms of your outstanding debt.
How Bad is Chapter 7?
Filing for bankruptcy should not be labeled as good or bad. The bankruptcy process is designed to help people who have no other option.
While filing for Chapter 7 will damage your credit report, the reality is, you most likely are already struggling to pay your bills and you have late payments. This means you’ve already reduced your credit rating and the bankruptcy process can help you stop the cycle of late payments and fees.
How Do I Know if I Qualify for Chapter 7?
You must pass a “means test’’ to qualify for Chapter 7 bankruptcy. The means test will review your income, expenses, secured debt, and unsecured debt to determine if your disposable income is below the median income for your state.
Can you be denied a Chapter 7?
Yes, you can be denied a Chapter 7 bankruptcy. A denial could be due to attempted fraud, false statements, concealing information, or failure to take credit counseling.
Hiring a bankruptcy lawyer will provide the education needed to successfully process your claim and it will help you stay on track with your documentation and filing requirements.