Are You Eligible for Chapter 7 Bankruptcy?

If you have debt problems, you may believe that declaring bankruptcy would be beneficial. It is essential to comprehend what bankruptcy is and what alternatives exist. As bankruptcy is not permanent, it may allow you to clear your debts and start over.

Are you considering filing for bankruptcy in Oregon? Filing for bankruptcy can be an emotional and stressful experience, which is why it is essential to find a bankruptcy attorney who can comprehend your financial situation and guide you through the filing process. 

However,  another question that arises is, are you eligible for Chapter 7 bankruptcy in Portland? How about chapter 13 eligibility, among others?

At Michael D. O’Brien & Associates PC, our Portland bankruptcy attorneys have more than two decades of experience assisting Oregon families in obtaining a fresh start through Chapter 7 bankruptcy and Chapter 13 bankruptcies, stopping wage garnishment, preventing home foreclosures or car repossessions, and assisting with matters pertaining to lien stripping and fair debt collection. Unlike other Oregon bankruptcy attorneys, we understand that bankruptcy is not for everyone, which is why we also offer alternatives to bankruptcy to help you resolve your financial issues.

What is a Chapter 7 Bankruptcy?

In Chapter 7 bankruptcy, also known as liquidation or straight bankruptcy, you can ask a court to discharge the majority of your debts so that you can start over. A judge will review your case and decide whether or not to grant your request.

If granted, the court imposes an “automatic temporary stay” that prevents creditors from attempting to collect payments or taking actions such as wage garnishment, repossession, or foreclosure during the pendency of the bankruptcy case.

Chapter 7 bankruptcy provides immediate relief to people with substantial debt, but it also has some disadvantages.

Filing for bankruptcy protection has a long-lasting negative impact on your credit score, and you may lose nonexempt assets that are sold, or “liquidated,” to repay your creditors. However, the majority of assets are exempt and not subject to liquidation.

Liquidation Process

Typically, the liquidation procedure involves three steps:

1. Your nonexempt assets are sold (if you have any)
2. Your creditors and lenders are paid from the sale of your property.
3. You are released from the majority of your remaining unsecured debts and can start over.

Keep in mind that your student loans, tax debt, and other secured debts are not “dischargeable,” and you will be required to repay them unless you can demonstrate exceptional circumstances. However, the majority of consumer debt, such as medical bills and credit card debt, is dischargeable.

Who May File Chapter 7 Bankruptcy?

In Chapter 7 bankruptcy, the priority is placed on selling off any assets that are not exempt in order to satisfy your creditors and clear the way for the discharge of any remaining debt. The procedure is capable of eliminating a wide variety of unsecured debts, including credit card debt, medical bills, and utility bills, amongst others.

The individual bankruptcy option known as Chapter 7 is the one that is used the most frequently by people. Individuals also have the choice to file for bankruptcy under Chapter 13, which is primarily concerned with the repayment of debt. (I will elaborate on the distinctions between the two in the following paragraphs.) In recent years, “family farmers” and “family fisherman” have had the opportunity to pursue bankruptcy protection under Chapter 12.

In order to file for bankruptcy under Chapter 7, you are required to meet certain eligibility requirements, one of which is a “means test.” The purpose of the test is to disqualify people with high incomes from being eligible for Chapter 7 bankruptcy protection.

If your average monthly income for the six months prior to filing for bankruptcy was less than or equal to the median income in your state, you are automatically considered to have passed the means test.

Even if your income is higher than the state’s median income, you may still pass the means test if it is determined that you do not have enough disposable income to pay your creditors after accounting for your income, expenses, and the number of people in your family. This determination is made after taking into account your income, expenses, and the number of people in your family.

Avoid These Mistakes Before Filing for Bankruptcy

Before you file for Chapter 7 bankruptcy, the courts will investigate all past transactions you made within a specific time frame. This “look back” period is typically between one and two years prior to filing, but it can extend up to ten years.

You can avoid the majority of common errors by delaying the filing of your bankruptcy until these deadlines have passed. Due to the fact that this is not always the case, it is crucial to consult with an experienced bankruptcy attorney to avoid allegations of bankruptcy fraud.

Avoid the following common mistakes before filing Chapter 7 bankruptcy:

• Avoid selling your assets. Contrary to popular belief, transferring assets out of your name will not shield you from the reach of the bankruptcy court. Even if the transfer was innocent, these transfers could lead a bankruptcy court to conclude that you committed bankruptcy fraud.

• Do not favor creditors. These types of payments to “favored creditors” are referred to as preferential transfers and may result in a “clawback” lawsuit, in which a bankruptcy court trustee sues the debtor to recover the money within the court’s jurisdiction.

• Avoid making large or extra purchases with your credit card. Unless for essentials such as gas, housing, or food, it is preferable to avoid making credit card purchases.

• Avoid depositing out of the ordinary sums into your bank account. It is best to avoid depositing any money into your bank account that is not your salary or payment.

This is not an exhaustive list of things to avoid if you are filing for Chapter 7 bankruptcy or are in the process of doing so.

Call our Portland Bankruptcy Lawyers Now!

Have you made up your mind to submit a Chapter 7 bankruptcy claim in Phoenix, Oregon? You most likely have questions about the process of filing for bankruptcy or even on your eligibility. For assistance in describing your circumstance, kindly give us a call or complete the following form. In order to put you at ease and provide free legal counseling, we will gladly spend the time necessary to answer your questions and discuss the different options available to you in accordance with the laws governing bankruptcy.

Struggling with debt? You are not alone. You need to get back up on your feet.

For a no-cost case evaluation with our legal team, please contact us today.