A Chapter 7 Bankruptcy is the most common type of consumer bankruptcy. In a Chapter 7 case, most of the consumer’s unsecured debts are discharge. Typically the type of unsecured debt wiped in a Chapter 7 Bankruptcy include credit card debt, unpaid medical bills, repossession deficiencies, signature loans, payday/cash advance loans, most collections and lawsuits. Secured debts—those debts secured by a lien on property such as a house or a car—are not discharged in a Chapter 7 case. Also certain unsecured debts cannot be discharged, such as child support obligations and most student loans.
Who Can File Under Chapter 7?
Chapter 7 Bankruptcy cases are available for most people. There are certain restrictions, including financial ability to repay your debts and the requirement that you have not filed a bankruptcy before in the last 8 years. The financial means test only comes into play for persons whose income surpasses the state median income levels. In Kentucky, the current median income levels are:
$40,020 for one person, $46,815 for a two-person family, $55,613 for a three-person family, and $67,783 for a family of four or more persons. If your family income is below these levels, you should qualify for a Chapter 7 Bankruptcy assuming you haven’t filed a bankruptcy in the past eight years.
Can I Keep My House?
In most cases under Chapter 7, you can keep your home under the terms of your current mortgage. If you have sufficient equity in your house, you could risk losing the house and might want to consider a Chapter 13 Bankruptcy instead. But usually homeowners who file for bankruptcy do so because they do not have enough equity to refinance their home to pay off their unsecured debts. So a debtor’s right to keep his or her house in a Chapter 7 case doesn’t often come into question. The question of whether a debtor should keep his or her home is almost always an issue in a Chapter 7 case that needs to be analyzed based on the debtor’s particular circumstances.
Can I Keep My Car?
America is the land of the free and the home of the brave. For many people, that precious freedom depends in no small part on personal transportation. So keeping a car is often a very important issue for debtors.
In almost all cases, a debtor may keep his or her personal vehicle by signing a “Reaffirmation Agreement” with the holder of the car note. A reaffirmation agreement essentially takes the place of your original agreement and makes it as though you have not filed a bankruptcy on a loan covered by the agreement. You may also be able to redeem your vehicle by paying the secured creditor the fair market value of the collateral, which is typically far lower than the amount you still owe on your current car loan when you purchased your vehicle. In exchange for redeeming your vehicle, the creditor provides you with the release of their lien.
You can find out more about the redemption process and even begin the process by visiting 722redemption.com.
What Else May I Keep?
The Bankruptcy Code has a number of exemptions for personal property. As a result, in most cases you can keep all of your personal property in a bankruptcy, including furniture, most electronics, other household goods, and retirement accounts (401(k), IRA, etc).
What Property Do I Have to Surrender?
Some property is not non-exempt and normally will be surrendered in a Chapter 7 case to pay at least a portion of the claims of creditors. Examples of non-exempt property include: cash and bonds (not part of a retirement account), investments over a certain amount, a second car (for single, non-married debtors), a second home, family heirlooms over a certain value, valuable collections such as paintings, coins, or stamps, and expensive trade or business equipment.
The Automatic Stay
The automatic stay is a very powerful tool. After we electronically file your Chapter 7 Petition for you, the Bankruptcy Court will enter an order protecting you against all creditor action. The order will stop all harassing phone calls, threats, lawsuits, repossessions, and garnishments.