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- Basics of Chapter 7 Bankruptcy
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Basics of Chapter 7 Bankruptcy
Chapter 7 Bankruptcy is the most popular type of bankruptcy for individuals. It is also the simplest and quickest type of bankruptcy. This type of bankruptcy is a good option to consider when you have no hopes of paying off your credit cards, medical bills, and payday loans reasonably and you have very low income or even no income. Chapter 7 bankruptcy consist of two basic parts: (1) selling your property to pay off what you can and (2)eliminating the rest of your unsecured debt like credit cards, medical bills, and payday loans. Most of the time, people who file for Chapter 7 bankruptcy give up very little, if any, property due to all the exemptions. Here is an overview of the basics of Chapter 7 bankruptcy.
Qualifying for Chapter 7 Bankruptcy
Before the process can get underway, you have to find out if you are eligible for Chapter 7 bankruptcy. In order to file for Chapter 7 bankruptcy, you have to pass a Means Test. A Means Test is a test to see if your income is lower than the median income of the state. For Texas the median income for one person is $41,225, two people is $55,895, three people is $60,503, four people is $67,296, and an additional $8,100 for every additional person in the household as May 1, 2013. If your current income is lower than the median income, you will automatically pass this test. However, if your income is over the median income, you must include information about your expenses to see if you can still qualify for a Chapter 7 bankruptcy. Most of the time, if you can pay for a Chapter 13 bankruptcy repayment plan, chances are you are not going to qualify for a Chapter 7 bankruptcy. However, you should consult an experienced lawyer before you believe that you cannot file for a Chapter 7 bankruptcy.
Starting the Chapter 7 Process
When you file for a Chapter 7 bankruptcy, the court will assign a trustee to you and your case. The job of the trustee is to make sure your debt is repaid as much as it could possibly can. If you have property and assets that are not exempt, the trustee will sell those in order to pay unsecured debts such as credit cards, medical bills, and payday loans. At that time, an Automatic Stay is placed on your case. An Automatic Stay prohibits most creditors from taking any type of collection action against you during your bankruptcy. Creditors will not be allowed to call you, collect money from you, foreclose on your house, repossess your car, or place a claim on your property.
Property During Chapter 7 Bankruptcy
Some property and assets are exempt in the bankruptcy process up to a certain dollar amount. If the equity in your property is covered by an exemption, you can keep it. That is why most people in Chapter 7 bankruptcy end up keeping a majority of their property and assets. If you have house or car, you are allowed those assets if they are paid off or you are not behind on your loan payments. If you are behind on your payments, your creditors can foreclose on your home or repossess your car.
The Chapter 7 Discharge
When you finish the Chapter 7 bankruptcy process, most of your unsecured debts such as credit cards, medical bills, and payday loans will be discharge. A discharge mean those debts are completely wiped out. However, other debts such as mortgage loans, car loans, student loans and child support payments are not eliminated in the Chapter 7 bankruptcy process. After you have been discharged and successfully finished your Chapter 7 bankruptcy, you are free to enjoy you new sense of financial freedom.
This is an overview of what to expect during a Chapter 7 bankruptcy. If you have any additional questions about personal bankruptcy, browse our website for more information and feel free to contact us at 214.748.4848 anytime. We might even post your question on our website to help other people just like you.