Filing Chapter 7: Bankruptcy Laws and Debtor Questions

Debtors considering filing chapter 7 bankruptcy often have a few questions regarding this type of bankruptcy protection vs. other types of bankruptcy, most commonly chapter 13.

Bankruptcy Laws: Who is Best Protected by Chapter 7?

Filing chapter 7 bankruptcy is generally best for those consumers who do not have high steady income. One of the requirements for a debtor to file chapter 7 bankruptcy protection is that they pass the chapter 7 means test. This is most easily done by those applicants that have little or no income when they decide to file for bankruptcy.

Common Chapter 7 Questions

Once it has been determined that chapter 7 is an option, here are some common questions that many consumers will have when they file:

Can I Keep My Car?

In most cases, your bankruptcy lawyer will be able to negotiate favorable stipulations on your behalf. You can choose to reaffirm you car loan debt, so that the car will not be liquidated.

Additionally, in some cases, you may be able to cram down a car loan, which will reduce your auto loan principle amount down to fair market value.

Will my House be Liquidated?

Chapter 7 bankruptcy laws often protect a primary residence from bankruptcy liquidation. This means that a primary residence will usually be protected from the bankruptcy trustees liquidation.

What Happens to My Credit Card Debt Under Chapter 7?

The main purpose of a chapter 7 bankruptcy is to liquidate the debtors assets and remove as much debt as possible. Unsecured debt, such as credit card debt will usually be discharged, meaning the debt goes away upon completion of the bankruptcy.

Will I Need to Hire a Bankruptcy Lawyer?

Having professional legal counsel representing the debtor during a bankruptcy proceeding is not required, but it is generally better for the debtor. A bankruptcy attorney will be able to use the most current bankruptcy laws and court rulings to help their client keep as much property as possible, while still getting rid of all debts, giving a debtor in serious financial trouble a “fresh start”.