Chapter 7 Bankruptcy FAQs
With changes to bankruptcy law taking place at the end of 2005, many people have questions when it comes to filing Chapter 7 bankruptcy. For example, what is the Chapter 7 means test? Is it harder to qualify for Chapter 7 bankruptcy after the 2005 law than before it?
Bankruptcy attorneys frequently hear such Chapter 7 FAQs as the ones below. Here are some answers to these common Chapter 7 bankruptcy FAQs.
- What is Chapter 7 bankruptcy?
- What is the automatic stay?
- What’s the difference between Chapter 7 and Chapter 13?
- How long does a Chapter 7 case usually last?
- Do I need a bankruptcy lawyer?
- What is the Chapter 7 means test?
- Is it harder to file Chapter 7 bankruptcy after BAPCPA?
- What fees are involved in Chapter 7 cases?
- What forms do I need to file Chapter 7 bankruptcy?
What is Chapter 7 Bankruptcy?
Chapter 7 is a kind of personal bankruptcy that offers individuals a fresh financial start by discharging, or excusing, many unsecured debts (such as credit card debt, medical debt and more). Chapter 7 is sometimes referred to as “liquidation” because, in theory, your bankruptcy trustee can liquidate – that is, sell off to raise cash any of your assets that aren’t protected by your state’s Chapter 7 exemptions. But most people who qualify for Chapter 7 bankruptcy have few or no non-exempt assets, so liquidation doesn’t usually play a large role.
What is the Bankruptcy Automatic Stay?
The bankruptcy automatic stay is one of the first protections offered to those who file for bankruptcy. In most situations, the automatic stay takes effect as soon as the initial paperwork in a bankruptcy case has been filed. Once activated, it protects filers from all forms of collection, including repossession, foreclosure, garnishment and lawsuits.
What’s Chapter 13 Bankruptcy?
You may have heard of Chapter 13 bankruptcy, which is the other type of personal bankruptcy available to those struggling with debt. There are a few major differences between the two chapters.
Chapter 13 is more of a reorganization of debts than an out-and-out discharge: rather than excusing filers from unsecured debts, Chapter 13 gives filers a chance to catch up on past-due balances while continuing to make payments.
How Long Does it Take to File Chapter 7 Bankruptcy?
Chapter 7 bankruptcy is a relatively quick process. Chapter 7 cases tend to take much less time than Chapter 13 cases. While a Chapter 13 repayment plan can last several years, Chapter 7 filers generally get their discharges in a matter of six months or so. This means those who opt for Chapter 7 bankruptcy have less time than those who file under Chapter 13 to complete the Debtor Education Course required for all bankruptcy petitioners since the passage of the new bankruptcy law in 2005. Lear more about how fast Chapter 7 bankruptcy can be.
Do I Need a Chapter 7 Bankruptcy Lawyer?
Sometimes bankruptcy petitioners are hesitant to hire a lawyer to help them with their cases, seeing legal guidance as an unnecessary expense. But working with a bankruptcy lawyer can be in your best interest in most cases.
The bankruptcy process requires you to fill out paperwork, file documents, adhere to court-mandated deadlines, respond to court orders and perform other duties that can be bewildering to someone without a legal degree. Luckily, finding a bankruptcy lawyer isn’t nearly as difficult as going through bankruptcy by yourself. Just fill out our online case evaluation form, and we’ll put you in touch with a bankruptcy attorney practicing in your area.
What is the Chapter 7 Means Test?
The Chapter 7 means test is a qualifying test that you must pass to be eligible to file under Chapter 7 of the U.S. Bankruptcy Code. It was introduced by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. The means test measures your income and your debt to prove true need.
The actual test involves a series of calculations, including a comparison of your family’s income to the median income of a family your size in your state. Depending on where you fall, you may also have to calculate your disposable income. Working with a bankruptcy lawyer will likely help you make sense of and navigate the means test.
Did the New Bankruptcy Law Make it Harder to File Chapter 7 Bankruptcy?
While the Chapter 7 means test was intended to tighten the qualification requirements to file Chapter 7 bankruptcy, most people have found that this form of bankruptcy protection is still available to them even after the new law. For those people who may not qualify for Chapter 7 bankruptcy, Chapter 13 bankruptcy may still very well be an option.
What are the Chapter 7 Bankruptcy Fees?
In order to file your Chapter 7 bankruptcy case, you’ll have to pay a fine of about $306 dollars initially.
A Chapter 13 case costs $281 to file. Then, depending on how your case progresses, you may have to fork over more cash – converting from a Chapter 13 case to a Chapter 7 case, for example, costs about $15, and making changes to certain forms after they’ve been filed costs money.
Although working with a bankruptcy lawyer may cost a bit of money initially, it will likely save you time and possibly cash in the long run since your case will probably run more smoothly with a bankruptcy attorney at the helm.
Please note the fees listed DO NOT include attorney fees, which will vary by state and depend on the complexity of your case.
What Chapter 7 bankruptcy Forms do I Need to File?
To successfully file Chapter 7 bankruptcy, complete the process and receive your discharge, you will need to complete the following works and appropriate Chapter 7 bankruptcy forms:
- Credit counseling briefing certificate
- Bankruptcy petition
- Submit “schedules to the court
- Debtor education certificate
- Statement of intention
- Statement of advisement
To obtain and complete this paperwork you must meet certain requirements and complete certain tasks, first. Your bankruptcy lawyer can take you through the process and make sure that the forms are completed accurately and on time.