CHAPTER 7 OVERVIEW
Chapter 7 bankruptcy stops collection activity and wipes out unsecured debt. It stops foreclosure and repossessions, and it allows you to return cars and houses without owing a deficiency balance.
Some debts are not discharged in a Chapter 7 bankruptcy such as child support, alimony, accidents where drugs or alcohol were involved, criminal court debt, and most student loans and taxes. If you have a large number of these type of debts (in dollars), you may want to file a Chapter 13 Bankruptcy.
Chapter 7 is designed to wipe out debt and give you a fresh financial start. It is important to list everyone you owe in a Chapter 7. If a debt is not listed, it is not discharged (wiped out). You can get rid of check cashing debt and payday loans, credit card debt, medical debt, court judgments for car deficiencies and other debts in a Chapter 7, but you must put their name and address and the amount you owe them in your bankruptcy. Credit card and other loans taken out within 70 to 90 days of filing may not be discharged.
Chapter 7 stops garnishments, bank account levy, check cashing loans, repossession and collection calls. It gives you relief from the phone calls and letters from your creditors. It can relieve the pressure of juggling pay day loans, car payments, and credit card bills.
WHAT CAN YOU KEEP IN CHAPTER 7?
You can often keep your house or car in a Chapter 7. We help you look at the amount of equity in your house or car to decide if it would be taken by the Trustee and sold for your debts. Also, you must be current in your payments on the car or house to keep it in a Chapter 7. We can protect between $5,000 and $25,000 in equity for your home.
On cars and your other personal property (furniture, computers, cash) the Bankruptcy Code and Tennessee exemptions protect $10,000 for an individual and $20,000 for a couple of personal property — including but is not limited to cars, cash in the bank, furniture, art, jewelry, and other assets.
Exemptions are amounts set out by law to allow you to protect up to a certain dollar amount of assets. We can protect up to $1,750 in tools of the trade for filers that are self employed. (For example: paid for computer, lawnmower, drills, hand tools.)
Congress set out the Means Test to determine if you are eligible to file a Chapter 7. We must look at your income, family size and certain costs of living to determine if you qualify under the Means Test to file a Chapter 7. Some clients who qualify for a Chapter 7 under the Means Test still file a Chapter 13 to keep an asset where they are behind on the payments — such as a house or car.
Qualified retirement accounts are sometimes protected in Chapter 7 Bankruptcy; however, if you have a loan against this type of account, or if the institution where your retirement is held can lend your money to you or a third party, it may make that account un-exempt under the 100% exempt rule. (These include 401k and IRAs.) You may wish to consider filing bankruptcy before using your retirement plan to pay debts. It is important to give the account opening information to your attorney before filing. An inherited IRA or 401k may not be protected.
CLIENTS ALWAYS ASK “HOW MUCH DOES IT COST TO FILE CHAPTER 7?”
We offer payment plans for the Chapter 7 attorney fee. There is a pre-filing and a post-filing contract for attorney fees if you choose to break up the payments. You can select a zero down Chapter 7 and pay your attorney fee and filing fee after filing. Some lawyers ask for post-dated checks. We do not do this. It is not allowed under Bankruptcy Case law. (Judge Stair decision in Eastern District of Tennessee.) All bankruptcy lawyers are required to list all fees and costs in writing at your first visit with them. We always give you a copy of this to take home with you. As of June 1, 2014, the Filing Fee to the Court went up to $335 on Chapter 7 cases. You may ask the court pay the filing fee of $335 in three installments after the case is filed. You must pay the filing fee or you will not get a discharge of your debts.