Chapter 7 Bankruptcy FAQs
What is a Chapter 7 bankruptcy?
Chapter 7 is the fastest and simplest form of bankruptcy. It is designed to discharge (eliminate) all of your unsecured debt as well as secured debt that you do not want to keep, i.e. an upside down home or car. Chapter 7 is designed to wipe out debts such as credit card debts, medical bills, or vehicle repossession deficiencies. If you have a house or a car you want to keep, you can still file Chapter 7 – however, you will have to be current with your payments and we will have to show that you have only limited equity in those items.
Chapter 7 will wipe out (eliminate) debts such as credit cards, medical bills, unsecured loans or vehicle repossession deficiencies. If you have a house or a car you want to keep, you can still file Chapter 7 – however, you will have to be and remain current with your payments and we will have to show that there is limited or no equity in those items.
If you decide to keep a particular account open (like a car loan, a mortgage, or even a credit card), you will reaffirm the debt by signing a reaffirmation agreement with your creditors. Note that creditors do not have to reaffirm with you – I can advise you whether or not a particular creditor is likely to agree to reaffirmation.
My advice is to consider Chapter 7 first. It has also been my experience that you will recover and start rebuilding your credit more quickly after Chapter 7 than you will after Chapter 13. Typically, the duration of a Chapter 7 case covers three to three and one half months as opposed to a Chapter 13 which can last three to five years.
What do I have to do to file Chapter 7?
The first thing you need to do is contact my office to see whether you can qualify for a Chapter 7 case. The qualification test is called the Bankruptcy Means Test. I encourage you to complete my new client intake questionnaire which provides me with all the information necessary to see whether you can file for Chapter 7. You can download my new client questionnaire and intake form as an Adobe Acrobat pdf file, or as a Microsoft Word document.
What does it cost to file Chapter 7?
Costs vary depending on the complexity of the case. For complex cases, costs can range near $2,000 while simple cases are less. Stittleburg Law Offices also has payment plans available should debtors need them.
In addition, you will incur some minimal costs relating to a legally required credit counseling session, varying between $15.00 and $50.00 depending on which company is used. Current bankruptcy laws require a debtor to attend a credit counseling session prior to the filing of a bankruptcy case. Additionally, prior to receiving a discharge, a debtor must complete a debtor education course, with costs varying again between $15.00 to $50.00 depending on the company used. Both the credit counseling session and the debtor education course can be completed on line or over the phone. If you need a referral to companies offering these services, please call my office at 770-396-4323.
Will I lose everything if I file for Chapter 7 bankruptcy protection?
The thought of losing property because of the filing of a bankruptcy case scares many people. Many also have private 401(k) accounts, government retirement accounts and personal private pensions or other investments that they think will get seized and used to pay creditors.
When you file a bankruptcy case, the courts allow you to exempt some of your property such as a portion of your real estate equity, your personal property and your retirement money. Much of this is safe and sheltered from the reach of the Bankruptcy Court by virtue of a Georgia law called the exemption law. if you want to read the Georgia Exemption Statute, click here. The Georgia exemption law sets out specifically what you can protect if you file a bankruptcy. For a report on the Georgia Exemption laws, please click here. The report discusses what you will be able to keep and what property might be at risk.
Can I file even if my spouse doesn’t want to?
You are permitted to file an individual case, even if you are married. If you file individually, only your debts will be included in the bankruptcy. If you have co-signed debts with your spouse, you will probably want to reaffirm those debts (sign a new agreement with the creditor and continue to pay).
If you reaffirm the debts, and continue to pay, your bankruptcy should not negatively impact your spouse’s credit. I say it should not because federal law says so. As a practical matter, your spouse should verify that his/her credit has not been damaged by checking his/her credit report. In late 2002, a number of non-filing, credit damaged spouses filed a huge class action lawsuit against the three credit bureaus because of errors in the credit reports of non-filing spouses. It will be interesting to see how this case changes the way credit bureaus collect and verify information.
If you and your non-filing spouse have a joint credit card debt and you choose not to reaffirm, the credit card lender can (and will) look to your non-filing spouse for payment after your case is over.
What is the Means test?
The Means test is a financial qualifier that reviews the past six months of gross income which is annualized and then compared against the Median income for the size of your family. For example, the Median income for a single individual in Georgia is currently $42,735 and for a family of four it is $72,290. If your annualized income falls below the Median income then you do not have to complete the test and you automatically qualify for Chapter 7. If it falls above, the test must be completed to determine if you can qualify to file Chapter 7. For more information regarding the Means Test and Median Income, please contact my office at 770.396.4323.