Chapter 13 vs. Chapter 7: Determining the Best Bankruptcy Path for You There are certain situations in which you may think you need to file for Chapter 13 bankruptcy to resolve your debt problems. Reading multiple articles on the internet can give you the impression that Chapter 13 bankruptcy is the best option for you. In this article, with the assistance of an experienced bankruptcy attorney, you will learn when Chapter 13 bankruptcy is better than Chapter 7 bankruptcy. In Portland, Oregon, Michael D. O’Brien & Associates, P.C. is the bankruptcy law firm that can effectively and efficiently assist you…
How to Qualify and File for Chapter 7
A Brief Overview of Chapter 7 Bankruptcy
Bankruptcy is a legal proceeding filed by a person or business struggling with debt and unable to settle monthly payments to their lenders. It offers the debtors to start fresh by forgiving their debts while also protecting creditor rights and help them obtain repayment through liquidation of assets.
The different types of bankruptcy are called bankruptcy chapters, and each chapter has its own benefits and drawbacks.
Among all the bankruptcy chapters, the most common is Chapter 7 since it has a quick turnaround time, is easy to understand, and frees you up from most of your liabilities.
In-depth Understanding of Chapter 7
In the United States bankruptcy code, Chapter 7 controls the process to liquidate your assets to pay off what is owed to your creditors.
Do you need to owe a certain total debt to qualify for Chapter 7 Bankruptcy?
There is no threshold for you to be deemed eligible for Chapter 7, but only certain debts will be discharged after a successful bankruptcy case is filed. These debts are:
- Mortgage loans
- Car loans
- Credit card debts
- Medical debts (from large medical bills)
- Past-due utility bills
- Personal or payday loans
- Tax liens (in some states)
Once these debts are discharged, the debtors are released from any personal liability for payment, and the creditor can no longer reach out for debt repayment.
However, any existing government debts, unpaid alimony and child support, income taxes, and student loans will not be discharged.
Process of Filing for Chapter 7 Bankruptcy
You need to complete a series of steps before your bankruptcy petition is approved.
Get a local attorney who provides bankruptcy services in your state.
After you have decided that you want to file for bankruptcy to wipe out your debts, better seek legal help from a competent bankruptcy attorney so that you won’t have to worry about learning the bankruptcy laws. Your bankruptcy lawyer will guide you through the whole bankruptcy process.
Take the two-part means test.
This test determines your paying capability. The means test evaluates whether your total monthly income is higher or lower than the median income. The bankruptcy court will deduct your living expenses and allowances from your income to see if you have enough disposable income left to pay off debt collectors.
Take up and complete a credit-counseling course with a nonprofit credit counseling agency.
File your bankruptcy forms.
File bankruptcy forms with the legal aid of your bankruptcy attorney, detailing your debts, income, properties, creditors, and other financial transactions incurred in the past two years. Ensure that you have included your petition to the court to begin the Chapter 7 bankruptcy process officially.
Attend meetings scheduled by the court-appointed United States bankruptcy trustee. During these meetings, you and your legal team will meet with creditors and the legal trustee to ask you questions. The legal trustee is an unbiased party who oversees the entire bankruptcy case, reviews your assets, and determines which of your assets can be liquidated for your debts to be wiped out.
Get a reaffirmation agreement for your secured debts.
Examples of secured debts are mortgages and car loans. The creditor can foreclose your property or seize the collateral property when you default a loan, but when you file for bankruptcy, the trustee will ask you whether you want to reaffirm your debt. Reaffirmation allows you to continue paying the lender per the original terms both parties have agreed to.
File for bankruptcy exemptions.
Not all of your properties need to be liquidated in a bankruptcy proceeding. You can file to exempt an asset since you can keep a certain amount of your total assets. For filing, please check the bankruptcy exemption laws of your state, as this can vary.
What Happens When You File for Chapter 7?
When the court has deemed you eligible for filing chapter 7 bankruptcy, and you have filed the forms and paid the fees, the court will immediately issue an automatic stay. An automatic stay is some sort of bankruptcy protection that protects you from creditor harassment, property foreclosures, repossession, and wage garnishments.
Once your qualified debts are discharged, you will be given a fresh start and have a second chance to rebuild your credit score since the filing will significantly affect your credit.
Get Through the Whole Proceedings with Legal Help.
If you are hesitant to ask for help from a qualified bankruptcy attorney from an esteemed bankruptcy law firm in Portland, Oregon due to the attorney fees, get a free case evaluation first. You can get a quote and free legal advice to help you decide whether declaring bankruptcy is the answer to your debt problems.
Our Oregon Attorneys are here to help!