Chapter 7 bankruptcy is often referred to as a "no asset" "straight" or "liquidation" bankruptcy. It is used for folks who have minimal assets, including minimal equity in a home, and significant debt. The law guarantees folks a "fresh start" and can be exceedingly helpful to our clients who find themselves in unfortunate financial turmoil.
What debts can I discharge?
Chapter 7 bankruptcy may eliminate most kinds of unsecured debt. Some examples of unsecured debts are credit cards, medical bills, most personal loans, judgments resulting from car accidents, and deficiencies on repossessed vehicles. In addition, you can discharge any outstanding balances after a home was foreclosed upon.
What can I keep?
In addition to getting rid of your debt, you typically can keep all of your property. As long as your car and mortgage payments are current, and there is no significant equity in your property, we should have no problem making the arrangements for you to reaffirm the debt. Keep your home, keep your car, keep your personal belongings, but eliminate your debt; that is our goal.
What debts cannot be discharged?
While most consumer debts are dischargeable in bankruptcy, the following are the debts that are not:
- Most federal and state income taxes. However, if the taxes are more than three years old, and other criteria are met, some taxes can be discharged in bankruptcy.
- Student loans and other educational debts (absent "undue hardship)
- Debts incurred by fraud (i.e., debts incurred without the intent to repay or debts incurred by use of a false financial statement or other written document).
- Debts incurred by willful and malicious injury, fiduciary misconduct, or embezzlement.
- Criminal fines, traffic tickets, and criminal restitution.
- Child support, spousal support, and monies owed under divorce decrees.
- Personal injury or death caused to others while driving under the influence of alcohol or drugs.
How do I start the process?
Make an appointment! During the initial consultation in our office we will ask you a series of questions from a checklist to determine whether you qualify for a Chapter 7 bankruptcy. We will review your income, assets, and debts. We will need to know about all of your assets to determine if you have any non-exempt assets. However, well over 95% of Chapter 7 cases are called "no-asset" cases, meaning that there are no assets to distribute to creditors.