Chapter 7 Bankruptcy

Chapter 7 bankruptcy ,also known as straight bankruptcy or liquidation bankruptcy, typically results in most of your debts getting discharged in about three months. While it is called “liquidation”, most people mistakenly believe that they are going to lose all of their possessions by filing. That is not true.

Benefits

Imagine that you are debt free in only three months- that’s what happens in most chapter 7 bankruptcy cases. Additionally, filing either chapter 7 or chapter 13 bankruptcy initiates the automatic stay, which gives you immediate relief from your creditors, stopping lawsuits, garnishments, repossessions and foreclosures. Your creditors are not even allowed to send you a bill in the mail or call you on the phone- that’s right, an end to those non-stop phone calls.

Exemptions

Every state has exemptions that may be used to protect property when filing for chapter 7 bankruptcy. Virginia exemptions include $5,000 for household goods, $1,000 for clothing, $10,000 for tools of your trade, $6,000 for equity in vehicle, $5,000 for family portraits and heirlooms, $3,000 for a firearm, and $5,000 to use for whatever you want, such as stocks or cash in the bank. Funds in ERISA qualified retirement plans such as 401(k)s are exempt by federal law. Property is not valued at what you paid for it, but rather what it is worth now (“yard sale value”), which is why over 95% who file bankruptcy actually lose nothing.

The Process

During your free consultation, we will evaluate your financial documents to determine if you qualify for Chapter 7 bankruptcy . Depending on our findings, we will make recommendations that will help you decide if the process is right for you. Because we understand the financial strain you are under after you hire us to represent you our rate is very affordable. Typically we can file a chapter 7 bankruptcy for $1,100. For this fee we will analyze your existing debt, decide what property, like your home or car, is exempt from collection, help prepare all of the paperwork, and act as a barrier from harassing phone calls from collection agencies. We will also help make sure the process runs smoothly and that you are fairly represented. After Meeting with you and collecting the documentation to complete your paperwork, we will personally sit down and go over each and every page of your bankruptcy paperwork together (typically 50 pages). After confirming that everything is correct, we will typically file the case with the court electronically while you are in my office, immediately providing you with a case number. About five weeks later we will meet a court official called a trustee in Alexandria. Don’t worry – there typically is no court or judge to stress over. We’ll meet with your trustee in a government conference room. The trustee will ask you about fifteen questions regarding your assets, which we will give you weeks beforehand, and after that, there is a 60 day waiting period before you get your discharge.

What Isn’t Discharged?

Along with several other technical exceptions, all of your debts will be discharged except for a). Child support b). Student loans c). Recent taxes (3 Years) d). Most traffic tickets and criminal fines.

Will I Qualify?

The Bankruptcy Abuse Prevention and Consumer Prevention Act was passed by Congress in 2005 and made several significant changes to the previous Bankruptcy Code. The time limit between chapter 7 filings was increased from seven to eight years, and you can’t have received a chapter 13 discharge in the past six years. Additionally, you must complete a Means Test to decide if you have enough disposable income to repay some of your debts. The Means Test is calculated by comparing your income over the past six months to the average family of your size’s income in Northern Virginia. Even if your income is higher, you can still qualify if your total allowed monthly expenses result in no disposable income, as is the case with a vast majority of people.

Rebuilding Your Credit

While debt consolidation can last for many, many years, a chapter 7 bankruptcy is usually closed in about three months, and ends with most if not all of your debts being discharged. Yes, any bankruptcy will stay on your credit for ten years, but it will typically only adversely affect you for as little as two of those years, allowing you to get back no track and onto a better life.