Chapter 7 Bankruptcy Basics From Our Napa And Santa Rosa Bankruptcy Attorney

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What is a Chapter 7 Bankruptcy?

Chapter 7, also known as a “straight bankruptcy,” may be available to those individuals and businesses who do not have the ability to pay their existing debts. Chapter 7 is a liquidation bankruptcy. A Chapter 7 trustee is appointed to review each Chapter 7 case. In theory, the Chapter 7 trustee may collect and sell your non-exempt assets. The sale proceeds are then paid to your creditors. Fortunately, most people who file Chapter 7 are able to exempt all their assets pursuant to state or federal laws, allowing them to retain their property. Business entities, corporations, LLCs and partnerships are not entitled to exempt assets in a Chapter 7.

Why is Chapter 7 Bankruptcy a Good Solution?

  • A Chapter 7 will immediately stop all collection activity against you, including harassing telephone calls and letters, lawsuits, bank levies, most wage garnishments, repossessions and foreclosures.
  • A Chapter 7 will grant you a discharge of most types of debts. A discharge is a court order that says you do not have to repay your debt. Debts that may be discharged include credit cards, unsecured personal loans, medical bills, utility bills, business trade debt and some income taxes. Not all debts will be discharged in every case, however.
  • You may also discharge debt secured against collateral such as a home, vehicle, furniture or timeshare, if you surrender the property to the lender.
  • If you wish to retain your home, vehicle, furniture, timeshare or other property that is secured by a loan on which you are still paying, you may do so as long as you continue to pay the lender. If your payments are delinquent on loans secured by vehicles, furniture or other personal property, and you can afford to resume making payments to the lender, a Chapter 7 will allow you to reaffirm the debt. Your delinquent payments would be included in a reaffirmation agreement. In some situations, you may be able to reduce the debt owed against personal property, such as a vehicle or furniture, if the property is worth less than the balance of the loan.

When is Chapter 7 Bankruptcy Not Helpful?

  • Not all debts will be discharged in a Chapter 7. Debts that you cannot discharge in a Chapter 7 and that you would still be responsible to pay include some income taxes, student loans, domestic support and marital property settlement obligations, court fines and criminal restitution obligations, certain debts for personal injury and debt incurred fraudulently or by theft.
  • A Chapter 7 will not allow you to retain your home if you are behind in your loan payments.
  • Individuals whose debt is primarily consumer debt, are subject to the bankruptcy means test. The means test is a mathematical equation to determine if you may have the ability to pay your debts in a Chapter 13. You are not eligible for a Chapter 7 bankruptcy if you have disposable income at the end of this mathematical equation.

If you have debt problems that cannot be resolved in a Chapter 7, you may be able to address these debts in a Chapter 13 bankruptcy.

Napa and Santa Rosa bankruptcy attorney Ellyn M. Lazar has been helping individuals and small businesses file Chapter 7 bankruptcy for nearly 30 years, and she can answer your bankruptcy questions during a free confidential consultation.

Your Financial Situation is Unique. Contact Santa Rosa and Napa Bankruptcy Lawyer Ellyn M. Lazar Today to Schedule a Free Confidential Consultation.

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