Facts about Chapter 7 Bankruptcy

Comparing Chapter 7 and Chapter 13 Options for Reorganization

Unless you're a farmer or you're incorporated, you likely have just two bankruptcy options at your disposal: Chapter 7 and Chapter 13. Which should you choose? The answer depends on a number of case specific factors.

Chapter 7 bankruptcy may be a better option if:

• you don't own a home
• you don't own other major non-liquid assets
• you have a low to moderate income stream
• you have a variety of unsecured debts (e.g. passed due medical bills, debt on credit cards, money owed to private creditors)

Chapter 13 bankruptcy might be better if:

• you want to keep your home (e.g. protect against foreclosure)
• you have other significant non-exempt assets.

Although both measures offer relief from many debt obligations, neither is a panacea. For instance, if you owe federal income tax, neither Chapter 7 nor Chapter 13 Bankruptcy will relieve you of that obligation. Your best solution for a smooth financial realignment is to speak with a professional bankruptcy attorney about your case.

How Will Filing For Chapter 7 Help You Find Your Financial 'Sea Legs'?

Chapter 7 Bankruptcy can help you organize assets to pay off long owed debts. It can also eliminate many money obligations. Legally, what happens is that your so-called "non-exempt" holdings become "liquidated" (i.e. sold off for cash), and then this money is meted out to creditors according to a carefully arranged hierarchy. In many Chapter 7 cases, there are no significant assets to be liquidated, but lawyers and judges may still refer to the filing as "liquidation" - so don't be thrown off by the semantics.

How Long Should You Expect Your Chapter 7 Bankruptcy Matter To Take?

Chapter 7 matters tend to flow through the court system quickly. In just a few months, you might be able to have your unsecured obligations discharged. These debts can include everything from delinquent medical bills, debt owed to credit card companies, personal loans and even some tax obligations. If your wages have been garnished, if you owe money to a payday lending operation, or if you've had a judgment rendered against you for a motor vehicle crash, you may similarly be able to discharge debts. However, Chapter 7 bankruptcy cannot discharge student loans, alimony or palimony, or federal income tax debts.

How Might The Chapter 7 Bankruptcy "Means Test" Impact Your Case?

In 2005, the federal government passed legislation to disincentivize some people from filing for Chapter 7 Bankruptcy. This so-called "means test" has in fact put the kibosh on a small percentage of bankruptcy cases -- but bear in mind that the number of cases dismissed has been very small, perhaps 4% of all Chapter 7 matters. And even if the Means Test does disqualify you from filing Chapter 7, you likely can still file for bankruptcy under Chapter 13.

If you are considering filing bankruptcy, call now to speak with one of our experienced bankruptcy attorneys to get the advice and assistance you need.