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Chapter 7
What is a chapter 7 bankruptcy?
"Chapter 7 bankruptcy helps you get rid of debt quickly and affordably and with legal protection from the court. Your unsecured and unmanageable debts like credit cards and medical bills can be discharged. This means you no longer owe the debt - legally. You are able to keep exempt property. Non exempt property will be sold by the court appointed bankruptcy trustee and the funds will be used to pay back the money you owe to your creditors. It is possible to reconfirm secured debts like your mortgage on your home, or car loan, and continue to pay those. Chapter 7 is the fastest and often most affordable path to debt relief and a financial fresh start."
What are the eligibility requirements to file Chapter 7?
"Income criteria established by bankruptcy law determine which debtors may file for Chapter 7 bankruptcy. In order to qualify under income guidelines, a filer's income must be equal to or fall below the median income in the filer's state. Every state has different income guidelines. A filer that falls within a state's income criteria may file for Chapter 7. However, if the filer's income is above the state's median, the bankruptcy court will require the filer to take a "means test" in order to establish eligibility for Chapter 7. The means test prevents filers with the ability to repay creditors from discharging debt. The means test assesses the filer's debt and income from the preceding six months. If the debtor has a certain amount of income leftover every month after paying creditors, the debtor will fail the means test. Although the debtor is ineligible for Chapter 7, Chapter 13 is an option. A Chapter 13 bankruptcy allows the debtor to repay creditors in a five-year repayment plan."
What happens after the bankruptcy is filed?
"After your case is filed, you will be asked to attend a "meeting of creditors." This "meeting" is actually not much of a meeting at all. Generally, no one attends, with a few exceptions: you (and your spouse if this is a joint filing) must attend; I will be there because I include this in your fee, and the Interim Trustee will be there. The trustee is an attorney who is appointed to ask you questions about your case, which you will be required to answer under oath. The trustee then reports to the bankruptcy judge as to whether he recommends a discharge. All this may sound scary, but it is actually a brief and routine procedure."
Will I be able to keep my home if I file for Chapter 7 bankruptcy?
"You will be able to keep your home in Chapter 7 bankruptcy if all of your equity in the home is exempt. What is exempt equity? Although the Chapter 7 bankruptcy trustee may sell some categories of your property to pay unsecured debtors, you are allowed to keep a certain amount (and certain types) of property. The amount of property you are allowed to keep is called exempt property.Bankruptcy law in all but a handful of states allows homeowners to keep a certain amount of the equity in their home -- this is called the homestead exemption. The exemption amount varies by state. If all of the equity in your property is exempt, the Chapter 7 bankruptcy trustee cannot use it to pay unsecured creditors and therefore has no reason to sell your home as part of the bankruptcy. As long as you keep current on your mortgage, the home remains yours. "
How else can filing Chapter 7 bankruptcy help me?
"Chapter 7 can help debtors in the following ways: Stops collector harassment: Once you file bankruptcy Chapter 7, the court notifies your creditors and collection agencies about it. The creditors or collectors should no longer contact you. However, if they continue with harassing calls, the creditor may be sanctioned by the court and have to pay your attorney fees. Stops foreclosure: Chapter 7 filing puts an automatic stay from mortgage foreclosures, until you get a discharge under this Chapter of the bankruptcy process. However, the mortgage lender can apply to the court and request for relief from the automatic stay. You can work out a suitable repayment plan with the lender."