By far the most common form of bankruptcy, chapter 7 is a relatively short and straightforward process that allows you to wipe out most, if not all, of your debt. Below is a brief summary of chapter 7 bankruptcy basics, but to learn about how to best address your situation, call an experienced bankruptcy attorney to set up a free consultation.
Who Can File For Chapter 7 Bankruptcy?
Chapter 7 is open to most individuals and businesses that haven’t filed a previous bankruptcy in the past 6 – 8 years. Unless you fall under one of a few exemptions (current or recent active military service, for example) you must qualify to file under chapter 7 based on your income. The primary test to determine whether or not you qualify for a chapter 7 bankruptcy is to compare your “current monthly income” to the median income for your state. If you make less than the state median you’ll almost always qualify for a chapter 7, but don’t be discouraged if you make more. If so, you have a second opportunity to qualify under the “means test”. An experienced bankruptcy attorney knows the means test inside and out and will help you to get the best result possible. If you still don’t qualify, you can consider filing a chapter 13 bankruptcy which has some benefits not available under chapter 7.
How Does Bankruptcy Protect Me?
Chapter 7 bankruptcy improves your life in two different ways. First, as soon as your case is filed you start to receive protection from your creditors under the “automatic stay,” a court order which prohibits your creditors from attempting to collect the debt. This will stop debt collection lawsuits, foreclosures, and garnishments immediately.
Second, the bankruptcy will result in the discharge of the vast majority of your debts. That is, your balance will become $0.00. Keep in mind that some debts such as student loans, domestic support obligations, and others can’t be wiped out. Credit card, medical, and repossession debt are almost always dischargeable, though.
How Does the Bankruptcy Process Work?
The process of obtaining a discharge of your debts in a chapter 7 bankruptcy is fairly straightforward. You’ll begin by preparing your bankruptcy petition, schedules, and other documents for filing with the court. This is work most commonly done by your attorney based on information you’ve provided. During the process, you will take two classes – one before your case is filed, and the second about a month or so after your case is filed.
Between 20 and 40 days after filing your case, you’ll have your “341 Meeting”, which you will appear at with your attorney. During this meeting the bankruptcy trustee, an attorney appointed to oversee your case and represent your creditors, will take a few minutes to question you about your situation and make sure things are being done properly. If you’ve hired an experienced bankruptcy attorney, he would have taken the time prior to filing your case to make sure that your prepared for the questions at your 341 meeting. Creditors may also appear at these meetings, but rarely do so. Again, the 341 meeting is a short, simple matter for most people and isn’t something to be anxious about.
No sooner than 60 days after your 341 meeting, your debts are discharged. No sooner than 30 days after the debts are discharged, your case will be closed. Congratulations - at this point your ready to get on with your life and enjoy your fresh start.
What Do I Have To Give Up?
A chapter 7 bankruptcy is also called a liquidation bankruptcy. What that means is that, in exchange for the discharge of your debts, you are expected to surrender certain assets to the bankruptcy court so that they can be sold to pay your creditors. While the concept of a liquidation may be intimidating, but don’t let it scare you. In Colorado we have a generous exemption law that protects the vast majority of what you own from being surrendered to the court. For example, you get to keep most, if not all of your household goods, your cars, your home, your retirement fund, and more, provided they fall within certain limits. An experienced bankruptcy attorney will help you hold onto your things so you’re in the best position possible after your case wraps up.
How Will Bankruptcy Affect My Credit
In the short term, filing bankruptcy can take a major toll on your credit score. However, if you’ve already significantly behind on your payments, you may not have much further to drop. Ironically, for many people chapter 7 bankruptcy is the quickest way to become credit-worthy again. One reason is that instead of bumping along the bottom of the credit score range with ongoing missed payments, bankruptcy wipes the slate clean and gives you a starting point for your recovery.
Because you’ve wiped out your debt in a chapter 7 bankruptcy, you become a much better credit risk. Your debt-to-income ratio is dramatically better, which is vitally important to new creditors. They know that the money you’re earning will go to repay them instead of that card that you maxed out five years ago. In fact, you are so much better off that you may be able to qualify for a home loan in as soon as two years.
While the process of filing bankruptcy is short and straightforward, the law involved in the process is complex, nuanced, and constantly changing. Choosing an experienced bankruptcy attorney who is dedicated to making sure that you get the best results possible is of the utmost importance. The Law Office of Clark Daniel Dray will provide the personalized service and attention to detail that are essential to a successful chapter 7 bankruptcy. Take the first step in putting your stressful debt in the past and call today to speak with an experienced bankruptcy attorney and to set up a free consultation at one of our offices in Boulder, Broomfield, Denver, Greenwood Village, Golden, Littleton, Louisville, and Lone Tree, Colorado..