Chapter 7 Bankruptcy

Deciding to file for bankruptcy is a one of the most important financial decisions you can make and you are not alone in this process. To help you to learn more about bankruptcy, the New Jersey bankruptcy attorneys at Scura, Wigfield, Heyer, Stevens & Cammarota, LLP, created the following information to help explain chapter 7 bankruptcy, as well some rules, process and options regarding bankruptcy. 

Get a Fresh Start From Your Debts With Chapter 7

What could you and your family do with a fresh start from your credit card debt and other loans? Chapter 7 bankruptcy may be the best option for helping you get out from under your burden of debt, while keeping your house and family car. Read below to learn more about New Jersey Bankruptcy Rules, Laws and Alternatives to filing bankruptcy. 

What Is Chapter 7 Bankruptcy?

Chapter 7 is also known as a Liquidation Chapter. This simply means that a debtor who files under Chapter 7 is entitled to retain certain assets, while the remaining assets, if any, are sold and distributed pro rata to his/her creditors in an effort to partially satisfy the debt. More often than not, a debtor under a Chapter 7 has a "No Asset Case". By filing Chapter 7, our lawyers may be able to help you:

  • Eliminate your credit card debt
  • Prevent car repossession
  • Stop wage garnishment and tax liens
  • Get your financial house in order

Stop Harassing Credit Collection Calls and Letters Immediately

Simply stated, the debtor may keep all of the property (house, car, 401K and personal property) he or she owns without having any of it liquidated. A bankruptcy under this chapter typically involves a 4 to 5 month period, at which time the debtor is fully discharged from his or her debt.

Once you file a Chapter 7, all collection activity towards you must immediately cease. All telephone calls, lawsuits, and wage garnishments will stop. Upon receiving a discharge from the Bankruptcy Court, you will no longer be obligated to pay most, if not all, of these debts. 

Although a bankruptcy stays on your credit report for a ten (10) year period, there are a number of ways in which you can reestablish your credit report. Once you are discharged from your debt under the Chapter 7, you cannot file another Chapter 7 petition for a eight (8) year period.

In a Chapter 7, or liquidation case, the bankruptcy court appoints a trustee to examine the debtor's assets and divide them into exempt and nonexempt property. Exempt property is limited to a certain amount of equity in the debtor's residence, motor vehicle, household goods, life insurance, health aids, specified future earnings such as social security benefits and alimony, and certain other personal property. 

The trustee may then sell the nonexempt property and distribute the proceeds among the unsecured creditors. Although a liquidation case can rarely help with secured debt (the secured creditor still has the right to repossess the collateral), the debtor will be discharged from the legal obligation to pay unsecured debts such as credit card debts, medical bills and utility arrearages. However, certain types of unsecured debt are allowed special treatment and cannot be discharged. These include some student loans, alimony, child support, criminal fines, and some taxes.

Alternatives to Chapter 7 Bankruptcy

  • Alternatives to Filing Bankruptcy - Many times there are alternatives to bankruptcy, including debt counseling and debt consolidation. You should educate yourself on bankruptcy and other debt elimination options to see what is a viable alternative for you.
  • The Dangers of Debt Settlement and Debt Consolidation Companies - Many debt settlement companies advertise that they can get credit card companies and other creditors to settle for less than half of what you owe. Know the important tips before using a debt settlement company.

Chapter 7 Means Test

In 2005, Congress made sweeping changes to the Bankruptcy Code. One of these changes included the addition of the bankruptcy means test as a way to qualify individuals for Chapter 7. The means test compares your household income to the median income of similar-sized families in the same region. If your income is below the median, you are eligible for debt relief under Chapter 7. Keep in mind that if your income is below the median income level for your area based upon your household size, then no means testing is necessary; thus, you would be eligible for a Chapter 7 bankruptcy. If you are over the median income level, then you have to go through the means test to determine if you are eligible. If your debt is primarily business debt (more than half), the median income levels and means testing analysis would not be applicable in your situation.

As soon as you begin to consider filing for bankruptcy as a viable option for your financial future, it is important to consult with a skilled lawyer. The sooner we can examine your finances the sooner we can put you on the path toward financial freedom. 

What if I don’t qualify?

Even if you do not qualify for Chapter 7 bankruptcy by virtue of the means test, you still might qualify to receive debt relief through filing Chapter 13 bankruptcy.

If you have questions about the Chapter 7 means test, do not hesitate to schedule a free consultation. Our bankruptcy attorneys can examine your financial situation and provide valuable legal advice and representation no matter how complex your question. 

 

Chapter 7 Bankruptcy Information

 Below are links to a few blog articles to help further your understanding of Chapter 7 Bankruptcy and bankruptcy in general. Beyond what is listed below, our blog has a ton of additional information for your continued education on bankruptcy. Again, we recognize that filing bankruptcy is a huge decision, and that the more information you have the better equipped you are to move forward.

 It is our hope that you find the information helpful, and then contact us with any further questions you have and to address the specific concerns that surround your situation as you consider filing bankruptcy.

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