Chapter 7 Bankruptcy
It is a drastic tool to help you resolve your debts. If your financial life has become so hard that you feel it’s impossible to continue paying your debts than Chapter 7 Bankruptcy is a possible way to get rid of your debts and start fresh. It’s sort of like a “get out of jail free card” for your debts. Do not take this lightly though. You must qualify by a means test and if you do go through with it, it will stay on your credit report for many years (up to 10) and make it very difficult to get credit in the future. Also, you may have to liquidate assets to pay off some or all of your unsecured debts.
What entity can file for Bankruptcy?
An individual, partnership, corporation or other business entity
How does it work?
1. You file a petition with the bankruptcy court in your area.
2. File with the court a complete list of your assets (property, cars, gold, stocks etc), liabilities, current income, expenses, statement of what’s going on with your finances, executory contracts (ie. credit cards, mortgage etc.), unexpired leases and tax returns for the current year and maybe more
3. You’ll be assigned a court trustee to handle your case
4. You will have to meet with the trustee and your creditors and be under oath
What if I’m married?
A husband and wife may file a joint petition or individual petition. Regardless of which you choose you will have to complete the filing requirements as if you are an individual.
What if my debts are mostly credit cards?
You’ll have a little extra to do.
1. File a certificate of credit counseling
2. File a copy of any debt repayment plan designed through credit counseling
3. A copy of payment from employers
How much does it cost to file for Chapter 7?
1. $245 – case filing fee
2. $39 - miscellaneous administrative fee
3. $15 - trustee surcharge
Total = $299
What if I don’t have the money for the fees?
If your income is less than 150% of the bankruptcy code definition of poverty level the court may waive the fees
How long does the process take?
No more than 60 days for the meeting with trustee and creditors. Within 10 days of that meeting the trustee will report to the courts whether or not the case is an abuse according to the means test.
What is the means test?
It is designed to prevent abuses of the bankruptcy code by making sure you can’t reasonably pay your debts. Click here to use Nolo’s means test calculator.
If you feel you are at your ropes end and Chapter 7 bankruptcy is looking more like the answer to your financial woes then you may want to speak to a bankruptcy attorney to help you.