Bankruptcy can be quite confusing. Lawyers of Los Angeles based bankruptcy law firm Recovery Law Group, confirm that there are numerous questions that people have regarding bankruptcy process and discharge. You can ask expert bankruptcy lawyers at 888-297-6023 about issues related to various bankruptcy chapters. Here are some FAQs related to Chapter 7.
What is Chapter 7 bankruptcy?
Also known as “Liquidation Bankruptcy”, Chapter 7 bankruptcy is an ideal way to get a fresh start as it wipes off most types of debts. In this case, any non-exempt property that you have is liquidated by the bankruptcy trustee and the proceeds are used to pay your creditors. In most cases of Chapter 7 bankruptcy, the filers have very little non-exempt property, hence they end up keeping nearly all of it.
Is it true that now it is harder to qualify for Chapter 7 bankruptcy?
The bankruptcy laws were revamped by the Congress in 2005 which resulted in stricter norms for potential Chapter 7 bankruptcy filers. Earlier a Chapter 7 bankruptcy case was dismissed by the bankruptcy judge if the debtor had enough disposable income for a repayment plan as per Chapter 13. Now, specific criteria are used to determine if a debtor can afford a Chapter 13 repayment plan.
For an individual to qualify for Chapter 7 bankruptcy they must be able to pass the means test. In this case, the debtor’s income is compared to the median income of the state for a household of a similar number of individuals. If debtor’s income is less than the median income, he/she qualifies for Chapter 7 bankruptcy. In case the income is above the state median, an account of the expenses and debt payments is seen to assess whether a repayment plan can be devised for Chapter 13 bankruptcy or not.
Are all unsecured debts wiped off in Chapter 7 bankruptcy?
Unsecured debts comprise of those debts which do not have any collateral attached with them, such as medical bills, credit card bills, personal loans, etc. Most unsecured debts are wiped out in Chapter7 bankruptcy. However, some unsecured debts like student loans, child and spousal support, tax debts due within previous 3 years, recent debt for any luxury items, and any debts arising due to fraud (writing a bad check, lying on credit application) are considered non-dischargeable. These debts remain even after bankruptcy.
Can I keep my home in Chapter 7 bankruptcy if I am current on my mortgage?
State and federal government provide exemptions for bankruptcy filers to protect some equity in the property. This allows them to get a fresh start. The homestead equity which allows exemption on equity on home to bankruptcy filers varies from state to state. If the homestead exemption covers all the equity in your home, you can keep your home in a Chapter 7 bankruptcy Los Angeles. However, you need to stay current on your mortgages to ensure your home remains with you.
If I don’t own a home, do I have to give up other property while filing for Chapter 7 bankruptcy?
Bankruptcy laws allow debtors to keep some amount of property, known as exempt property. This includes some equity in home, vehicle (up to a fixed value), clothing, furnishings, household appliances, personal effects, retirement funds, pensions, tools of the trade, etc. Many times, debtors end up keeping nearly all of their property when they file for bankruptcy.
