Chapter 7

Chapter 7 Bankruptcy

            A Chapter 7 bankruptcChapter7Imagey is often referred to as a straight or liquidation bankruptcy.  In the most general of terms, it involves filing a petition with the Federal Court that lists all of your assets and liabilities for the purpose of obtaining a discharge that eliminates your debts.  The principle behind bankruptcy is to allow individuals who have become overwhelmed by debt to get a fresh start.

          As part of the discharge, Chapter 7 may allow you to wipe out most, if not all, of your unsecured debts (i.e. credit cards, medical bills).  In addition, it may also stop wage garnishments, bank account levies, and other forms of collection action including lawsuits. However, Chapter 7 is probably the wrong choice if you are behind in payments and facing a home foreclosure or vehicle repossession but you want to keep the property.  In these situations, a Chapter 13 may be more appropriate.  If you are facing foreclosure or repossession and do not want to keep the home or vehicle, then Chapter 7 allows you the possibility of surrendering the unwanted property and discharging any liability for a deficiency balance.  In other words, you may be able to walk away and owe nothing.

          One of the trade-offs for receiving a discharge that wipes out debt is the requirement that non-exempt property be turned over for sale and distribution to creditors.  Exemptions are complex, but as a general rule the things you exempt are the things you keep.  In most Chapter 7 cases, the loss of property seldom becomes an issue because most possessions can be covered by an exemption.  And exemptions only need to be applied to equity.  For instance, if you own a car worth $5,000 but owe the bank $4,000 on the loan, then you have $1,000 in unprotected equity in that car.  But if you live in a state that allows you a $1,000 exemption towards automobiles, then this amount can be applied to the car making it 100% exempt.

          Before filing for bankruptcy, it is critical to understand the nature and value of the property you own, as well as the applicable exemptions that can be claimed.  Mistakes regarding exemptions can have serious consequences.  If you are seeking assistance with filing bankruptcy, it is also important to note that some organizations offer document preparation services for a minimal fee. These services may be provided by a paralegal or non-attorney who primarily assembles bankruptcy forms.  However, non-attorneys are prohibited from providing you with legal advice, and are unable to represent you after your case is filed.  Filing bankruptcy can be a difficult and complex process.  Before retaining anyone to represent your interests, it is worth inquiring into their experience and qualifications.

          The Law Office of Jonathan T. Mitchell, PLLC focuses on providing personal service to clients in order to minimize the stress and complexity that can be involved with filing bankruptcy.  My firm also zealously represents and protects clients’ interests through all phases of the process from pre-filing to final discharge.  Some of the services the firm provides on a regular basis include: pre-filing asset analyses to ensure that all legally available exemptions are claimed, full representation at all required court hearings and motions filed during a pending petition, and the negotiation of any Reaffirmation Agreements for secured debts. Contact my office today for a free consultation to discuss the bankruptcy options that may be available to you.