WESLEY CHAPEL BANKRUPTCY ATTORNEYS

CHAPTER 7 BANKRUPTCY


What is chapter 7 bankruptcy?

Chapter 7 bankruptcy permits a debtor to discharge their unsecured debt with certain exceptions. Examples of unsecured debt include credit card debt and medical debt. A debtor must be eligible to file a chapter 7 bankruptcy through a “Means Test.” If a debtor is eligible to file a chapter 7 bankruptcy, it can be a good way to eliminate unsecured debt. Though the trustee is permitted to liquidate assets under this chapter of bankruptcy, the debtor is permitted to retain certain “exempt” property.

What is the “Means Test”?

The bankruptcy Means Test is simply the formula that is used to determine whether you are eligible to file a chapter 7 bankruptcy case. Not every individual has to undergo the means test. If your income (or your combined income if you are married) is less than the median income of the state in which you live, you do not even have to undergo the means test in order to be eligible to file a chapter 7 case. The median income varies each year and is set based on the number of people in your household.

In the event that your income is greater than the median income in your particular state, you must undergo the mean test to determine eligibility to file a chapter 7 case. The means test begins by calculating your “current monthly income” and then deducting certain expenses from that “current monthly income.” This is meant to determine whether or not an individual has extra income that could potentially be used to repay creditors.

If it is determined that an individual has too much extra income, that person will not be permitted to file a chapter 7 bankruptcy case. However, an individual would still be permitted to seek debt relief through a chapter 13 bankruptcy case.

For more information on chapter 13 bankruptcy, click here.

What property will I be allowed to keep?

Though a trustee is permitted to liquidate assets in a chapter 7 bankruptcy, certain property is “exempt” from liquidation by the trustee. In other words, you are allowed to keep certain property. For example, in most chapter 7 bankruptcy cases, you are permitted to keep your homestead property, your vehicle provided that the vehicle does not have more than $1,000 in equity, qualified retirement accounts, education savings accounts, personal property valued up to $1,000, and other property up to $4,000 if you do not own a homestead property.

How long will my chapter 7 case take?

A chapter 7 bankruptcy case typically takes no longer than 6 months from the filing of the petition to the discharge. However, there a variety of things that can delay a chapter 7 bankruptcy case. A simply way to prevent your case from being delayed is to be sure that you are meeting all deadlines. It is important to provide the trustee will all required and requested documents within the required timeframe. It is also important to complete your credit counseling requirements on time as this will also cause a delay in obtaining your discharge.


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