Chapter 7 bankruptcy can solve financial problems quickly and efficiently. Lasting only about 5 months from start to finish, Chapter 7 is truly a “fresh start” bankruptcy:
- wipes out 100% of credit card debt
- wipes out 100% of medical bills
- wipes out 100% of signature debt
- wipes out 100% of deficiency balances (following vehicle surrender or lease cancellation)
- allows you to surrender property (real estate, vehicles, furniture, jewelry) and walk away from the debt with no penalty
- cancels lawsuit judgments and wipes out underlying debt
- cancels unfavorable leases (vehicle or residential)
If you are a good fit, Chapter 7 can literally change your life for the better. However, not everyone qualifies for Chapter 7, nor is Chapter 7 the right solution for every debt problem.
Who Qualifies for Chapter 7
In order to qualify for Chapter 7, we have to show that your income is relatively modest and that you don’t have much or any disposable income left over at the end of the month. The Bankruptcy Code defines “modest income” as around $41,000 annually for a single individual or around $70,000 annually for a family of 4. We can sometimes fit higher income clients into Chapter 7 if the have higher than average household expenses. The calculations we perform to determine whether you qualify for Chapter 7 is called the “means test” analysis.
A big part of what we do as bankruptcy lawyers involves analyzing your budget. We can help you figure out where your money is going and whether you are allocating funds each month to expense categories that will be approved by the bankruptcy judge.
Is Chapter 7 the Right Choice?
Even if you qualify for Chapter 7, it may not be the right choice for you. For example Chapter 7 would not make sense if you are trying to stop a home foreclosure and keep your home, or if you need to catch up payments on an auto loan. In those circumstances Chapter 13 is a better choice.
Similarly if you own valuable property free and clear, Chapter 7 would probably not make sense because filing might result in your losing some of your assets.
Chapter 7 usually can’t do much with student loans, child support, or taxes (although it can discharge old tax debt).
Who is the Ideal Chapter 7 Debtor?
Chapter 7 works best for men and women of modest income who have become overextended on credit cards, or who are facing a lawsuit, or who previously made a bad financial decision and now need a second chance.
- You can own a home that you want to keep and file Chapter 7
- you do not have to give up your car when you file Chapter 7
- no one is going to come to your home to inventory your personal property when you file Chapter 7
- you will see your credit score bounce back from within about a year after your case is over
How do You Find Out if Chapter 7 Makes Sense for You?
You can and should learn as much as you can about bankruptcy by reading this and other web sites. However, no web site can take the place of a telephone call or in-person meeting with a bankruptcy lawyer. The Bankruptcy Code contains dozens of rules, and it also contains exceptions to almost every rule.
If you see storm clouds gathering and you want to learn more about your bankruptcy and non-bankruptcy options, we have you covered. Our “2 page mini-questionnaire” is here – fill out this simple form and fax (770-393-0240) or email it to us (atlantabankruptcy (at) gmail.com). We also invite you to call or email attorney Jonathan Ginsberg or attorney Susan Blum. We’d be happy to walk you through the process.