Chapter 7 Bankruptcy Attorneys
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Chapter 7 Bankruptcy is nicknamed the “liquidation bankruptcy”. The goal in a chapter 7 bankruptcy is to receive a discharge. The discharge wipes away an individual’s legal obligation to pay back debts and receive a fresh start. In a chapter 7 a debtor does not pay a monthly payment and a no asset chapter 7 bankruptcy case lasts typically between 3.5 – 4 months.
There are some debts not dischargeable in a chapter 7 bankruptcy. For example alimony, child support, fraudulent debts, debts steaming from DUI, tickets or court fines, most IRS debts, student loan debts and other certain debts. Most people who file chapter 7 bankruptcy have unsecured debts consisting of credit cards and medical debt, which are dischargeable under chapter 7 bankruptcy.
Secured debts, such as mortgages and car loans can be kept after a chapter 7 bankruptcy. You have three options redeem, retain or reaffirm. Redeeming your debt is where you pay the fair market value of the asset in a lump sum payment to the creditor. Retaining is where you keep the asset and you keep making payments on it (most secured debts are retained). Reaffirming your debt is entering into a new contract through bankruptcy keeping your legal obligation to pay the debt back. Some creditors require a reaffirmation on a car loan to keep your vehicle after bankruptcy is over. Please note a chapter 7 bankruptcy does not extinguish a lien on property.
A chapter 7 bankruptcy case begins with the debtor filing a petition with the bankruptcy court which nearest serves the area where the business is organized or conducts is principal place of business. In addition to the petition the debtor must also file full schedules listing all of their debts and assets, a schedule of current monthly income and expenses, a statement of financial affairs and a means test.
Many clients ask whether or not our Chapter 7 bankruptcy fees include their filing fees or "court costs". They do not. There is currently a filing fee of $306 paid to the court. As of November 2012 a debtor filing chapter 7 bankruptcy must pay $100 of the filing fee when the case is filed and pay the remaining $206 to the court within 120 days after the case is filed.
Once the chapter 7 case is filed the automatic stay is in place. This is notice to all creditors they can no longer collect a debt without permission from the court. All harassing phone calls, collection notices, garnishments most lawsuits, etc must stop. Failure to do so is against the law and can be persecuted in the bankruptcy court.
Between 21 – 30 days after filing a debtor must attend court to the 341 meeting of creditors. This is when you meet with the bankruptcy Trustee whose job is to administer the bankruptcy estate on the side of the creditors. A debtor is put under oath and testifies to the Trustee’s questions about the debtor’s bankruptcy petition and schedules. The Trustee is appointment by the bankruptcy court. Trustees are not judges, they do not determine if you get to file for bankruptcy or not.
Their job is to go through a debtor’s petition and liquidate any nonexempt assets. After the 341 meeting of creditors is conducted the Trustee either enters with the court a report of no distribution (AKA no asset case) or the case is an asset case. Most debtor’s today keep everything they own.
An experienced Olympia Chapter 7 bankruptcy attorney will know how to plan a bankruptcy case to ensure assets are protected and not liquidated by the Trustee. Applying the exemptions Washington State allows does this. Sometimes strategic planning is necessary.
What happens in an Olympia Chapter 7 bankruptcy?
• Garnishments in an Olympia Chapter 7 bankruptcy
If a creditor sues you for money you owed them, they can potentially garnish your wages 25% after taxes! They can also put a lien (like amortgage) on your house, and take all the money out of your bank accounts. If you have been served papers, call us right away! We can stop garnishments, and often can get some of the money back.
• Lawsuits in an Olympia Chapter 7 bankruptcy
A bankruptcy will stop all civil lawsuits, and will usually discharge those debts in full.
• Your medical bills in an Olympia Chapter 7 bankruptcy
Medical bills are usually dischargeable in full through chapter 7 bankruptcy. Half the people that have to file bankruptcy do so because of medical issues.
• Your credit card bills in an Olympia Chapter 7 bankruptcy
Your credit card bills are completely dischargeable in chapter 7 bankruptcy, unless you used them knowing you were going to file bankruptcy, or knew you were going to be unable to pay them back. We will make sure to talk to you about recent use of your credit cards.
• Your Payday loans in an Olympia Chapter 7 bankruptcy
Payday loans are completely dischargeable in bankruptcy.
• How will an Olympia Chapter 7 bankruptcy affect my credit?
A bankruptcy will show up on your credit report for up to 10 years. But negative credit, like missed payments, shows up for 7 years anyway. In a few instances, it may harder to get certain kinds of jobs or licenses that involve the handling of other people’s money. But bad credit will have the same impact as well. Getting loans may be harder at first, until you rebuild your credit, and interest rates may be higher. Sometimes bad credit or bankruptcy can increase insurance costs.
However, most people are able to rebuild their credit in just a couple of years, and even get loan offers right after they file bankruptcy. This is because the lenders know you don’t have any more debt, so you are a safer risk.
Many people will experience an INCREASE in their credit score after filing bankruptcy, because their debt-to-income ratio will improve greatly.
• Can I finance a home or car after my Olympia Chapter 7 bankruptcy?
You can get FHA financing 2 years after filing a chapter 7 bankruptcy, as long you have the income, and the house qualifies.
Many of our clients tell us they get auto loan offers right after filing bankruptcy. But be sure to shop around carefully for the best interest rates, because they can be higher right after a bankruptcy. Some lenders may want more money down to be more secured in the loan.
• Your student loans in an Olympia Chapter 7 bankruptcy
Student loans are not usually discharged in bankruptcy, unless you can prove the following:
1. Paying the loans would be an undue hardship on you and your dependents.
2. The condition causing the hardship will exist for most of the repayment period.
3. You have made a good faith attempt to repay the loans, applied for forbearances and deferments, and tried your best to repay. If you have never bothered to pay your student loans, and never tried to work something out with the lenders, then you probably will not be able to discharge the student loans.
Student loan discharges involve a separate process called an “adversary proceeding”, which is filed after you file your bankruptcy case. We would be happy to discuss this other process with you.
• Your car in an Olympia Chapter 7 bankruptcy
If you owe money on a car, you must continue to pay for it if you
want to keep it. Sometimes the lender may require you to “reaffirm” the
debt, which means you are back on the hook for the entire balance of
the loan in spite of the bankruptcy. You can also give it back in the
bankruptcy and you will not owe any more money on it. Another option is
to “redeem” the car, which means you pay the current value of the car
(not what you owe on it, unless you owe less than the car is worth), and
this is usually done through special lenders that will give you a new
loan. Talk to our experienced attorneys about your options.
If your car is paid off, we will look to see how much it is worth. If it is very valuable, it is possible you could lose the car in the bankruptcy. It is important NOT to transfer the car out of your name, and to talk to one of our attorneys to see if it is possible to keep it. You have “exemptions” which protect your property, including cars, in a bankruptcy. Most people are able to keep their cars.
• Your furniture in an Olympia Chapter 7 bankruptcy
Like cars, if you owe money on the furniture, you have to keep paying
if you want to keep it. You can also surrender it back to the lender
and not owe anything on it anymore, or redeem it by paying its current
value to the lender.
If the furniture is paid off, there are large exemptions that will protect it through the bankruptcy. We always look at your situation and advise you what will happen. The vast majority of people keep their furniture in bankruptcy.
• Your home (both equity and debt) in an Olympia Chapter 7 bankruptcy
Like cars and furniture, if you owe money on your house, you have to keep paying on it to keep it. You can also surrender the house back, and not owe on it anymore. If you want to stop a foreclosure, a chapter 7 can do that temporarily. However, if you want to save your house and catch up on the payments, talk to our attorneys about filing a chapter 13 to save the house. If your house is worth a lot less than the balance on the first mortgage, you may even be able to strip off the 2nd mortgage and discharge it in a chapter 13 bankruptcy!
If you have more than $125,000 in equity in your house (the difference between its value and what is owed on it) you may lose your house in a chapter 7 bankruptcy. That’s why it is very important to talk to our attorneys. You may be able to file a chapter 13 instead, and keep the house.
• Your property in an Olympia Chapter 7 bankruptcy
“Property” means real estate, and personal property like money, jewelry, furniture, cars, etc. The bankruptcy laws have “exemptions” which allow you to keep your property in most instances. Our experienced attorneys will look review your property carefully to see if anything is at risk.
• Your paycheck in an Olympia Chapter 7 bankruptcy
Normally, the bankruptcy will not affect your paycheck, since there are plenty of exemptions to protect it. The bankruptcy can also protect your paycheck from garnishments.
• Your personal property in an Olympia Chapter 7 bankruptcy
“Personal property” includes furniture, jewelry, cash, money in the
bank, clothes, vehicles and other things that are not real estate. Most
people, about 90%, keep their personal property through a bankruptcy.
• Your retirement, pension, IRA, and 401K in an Olympia Chapter 7 bankruptcy
Retirement accounts, like IRA’s, 401(k)’s, and pensions are usually 100% exempt, and cannot be taken from you in a bankruptcy. Unusually large contributions right before a bankruptcy can cause problems, so make sure to talk to our attorneys about retirement accounts.
• Your vacation or rental home in an Olympia Chapter 7 bankruptcy
If you owe money on your vacation or rental home, or a timeshare, you
must continue to pay if you want to keep it. You can also surrender it
back and not owe any money. However, if you have to pay homeowner’s
dues, you may still be liable for any new dues that become payable AFTER
you file your bankruptcy, until the house or condo is in someone else‘s
name thorough a foreclosure or other transfer.
If you are taking a substantial loss on your vacation home or rental, in rare cases the US Trustee (who oversees bankruptcy filings) may require you to surrender it if it is interfering with your ability to pay other creditors.
If you have substantial equity in your real estate or timeshare, it may be at risk in a bankruptcy, so make sure to address this with our attorneys.