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Discharging Debt in a Chapter 7 Bankruptcy

Posted by attorney Arthur Hausmann

Chapter 7 bankruptcy is commonly called the “debt liquidation" bankruptcy. Where some people will need to liquidate their assets, many people get to keep everything they own because they have very few assets to begin with.

If you are thinking about filing for Chapter 7 bankruptcy but you are afraid that you will have to liquidate everything you own, you probably don’t need to worry. In many cases, individuals get to keep personal property such as their furniture, vehicles, clothing, tools and jewelry.

Why is this? Because there are exemptions that allow Chapter 7 filers to keep a certain amount of their property and in many cases, debtors get to keep everything they own. If you have an excess of personal property such as multiple vehicles, luxury boats and such, you may be required to liquidate those items, but if you are literally living off the basic essentials, you may not need to liquidate anything.

Before you can file for bankruptcy you will need to pass the bankruptcy “means test." With this test, your attorney will compare the median income for a household of your size to the median income of your state. If your income falls below the median income, then you automatically qualify for Chapter 7. If your income is above that figure, your attorney will apply particular allowable deductions to the formula. If your income is still too high, then you will have to file a Chapter 13 debt reorganization bankruptcy instead.

If you pass the “means test," you will be able to move forward with the Chapter 7 filing. Fortunately, the process is relatively quick, with the average discharge being complete within 4 to 6 months. Once the petition is filed, you will immediately obtain relief from the “automatic stay" that is placed on all debt collection activity. This “stay" prohibits collectors from contacting you by phone or mail. They must cease all debt collection activity for the duration of the bankruptcy, otherwise face legal consequences.

You will have to attend one meeting where you meet with the bankruptcy trustee face to face; this is called the meeting of the creditors. This meeting is held in a room with a number of other debtors who are also filing. You will attend this meeting with your lawyer and it will be rather brief. This will afford your trustee the opportunity to ask you any questions that he or she might have.

What kinds of debts can you include in your Chapter 7 petition? You can include unsecured debts such as medical bills, credit cards, utility bills, personal loans and certain taxes (more than 3 years old). What cannot be included are debts such as student loans, child support, spousal support, court ordered fines, and victim restitution.

If you are interested in learning more about your bankruptcy options and alternatives, contact a highly experienced bankruptcy lawyer as soon as possible. Your attorney will be able to explain the entire process in simple terms. They can also answer any questions that you might have so you can make an informed decision about what to do next. So don’t wait, contact a bankruptcy lawyer today!

Additional resources provided by the author

The Law Offices of Arthur R. Hausmann has been providing the residents of Orange County debt relief advice for more than 24 years. When you’re seeking advice regarding bankruptcy, debt relief, credit repair and restoration, and debt collection, there’s nothing like experience to guide you down the right path. Their firm has successfully represented clients faced with all sorts of debt problems, and they have used their knowledge to help them find solutions and rebuild their credit. If you are presently experiencing overwhelming debt, don’t give up hope, an attorney from their firm would like to have the opportunity to help you find the optimal solution to your troubles. Contact an Irvine bankruptcy lawyer from their firm by calling (949) 298-4413 for a free initial consultation.

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