Things You Need to Know When Considering Chapter 7 Bankruptcy
You’ve hit a rough patch. Maybe you’ve lost your job or been forced to take a pay cut. Maybe you’ve contracted an illness or suffered an injury that makes it difficult or impossible for you to work and meet your financial obligations. Maybe you’re in the middle of a divorce with all the financial hardships that are often involved. Maybe things just got away from you.
Whatever the reason, you know that personal bankruptcy is your best way forward, but you know nothing about how bankruptcy works. Here are some frequently asked questions about Chapter 7 bankruptcy petitions, so you can determine whether you qualify and whether seeking protection through Chapter 7 is in your best interests.
What Is a Chapter 7 Bankruptcy Filing?
With a Chapter 7 bankruptcy petition (also known as a “liquidation”), you have the right to permanently discharge certain debts. You’ll no longer be legally obligated to pay any debts that are permanently discharged. In exchange, you’ll agree to relinquish some of your property to the bankruptcy court to be sold to pay off your creditors.
Can All Debts Be Discharged in a Chapter 7 Proceeding?
No. Under the bankruptcy laws, you cannot discharge child support arrearages. In addition, student loan debt can rarely be discharged, and most tax obligations are extremely difficult to discharge in Chapter 7.
The court also will consider any money you spent during the 90-day period preceding your bankruptcy filing, looking for evidence of potential bankruptcy fraud. The debt for any luxury items purchased during that period will not be subject to discharge. The court may also look for large or unusual transactions that might indicate an attempt to either hide assets or give priority to one creditor over others.
What Property Can You Protect in a Chapter 7 Bankruptcy?
In a U.S. bankruptcy, you can claim exemptions under either federal or state law. In Texas, it’s almost always to your benefit to choose the state exemptions, as Texas has far and away the most generous exemptions in the country. Most individuals in Texas who seek protection under Chapter 7 are able to keep all their property.
Can Anybody File for Protection Under Chapter 7?
No. To qualify to permanently discharge debts in a Chapter 7 proceeding, you must submit to what is commonly referred to as the “means test.” You must submit information about income and other resources available to you. That information will be used to determine whether or not you can repay your creditors over a three-to-five-year period. If you can, you’re not eligible to discharge debts under Chapter 7 and instead must reorganize your debt in a Chapter 13 proceeding.
What Is the Automatic Stay and How Does It Protect You in a Personal Bankruptcy Filing?
When you file for bankruptcy, an “automatic stay” immediately goes into effect. The stay applies specifically to your creditors and bars them from calling, writing, or taking any action to collect a debt from you except by going through the bankruptcy proceeding. Violation of the automatic stay can lead to sanctions against a creditor.
Contact an Experienced Rockwall, TX Chapter 7 Bankruptcy Lawyer
At the Law Offices of Carrie Weir, all potential clients are entitled to a free initial consultation. To arrange an appointment to discuss your rights and options in bankruptcy, contact my office online or call 972-772-3083. I handle Texas personal bankruptcy filings in Kaufman County, Rockwall County, Collin County, Dallas County, Hunt County, and the surrounding counties.
