A Chapter 7 Bankruptcy is the total forgiveness of all your unsecured debt. Unsecured debt includes credit cards, medical bills, old utility bills, personal loans, deficiency balances, judgments, etc. In a Chapter 7 all of this debt is wiped ; you will never owe that money and the creditor can never attempt to collect the debt in the future. Chapter 7 Bankruptcies are a short process and only take approximately 4 – 6 months to complete once your Chapter 7 is filed.
Can I Keep My Property?
In a most cases you will be allowed to keep 100% of your property. Whether you get to keep all of your property is going to depend on the exemptions used in your case. Exemptions are state and federal statutes that protect your property; they can protect vehicles, retirement accounts, life insurance, cash, household goods and personal belongings, to name a few.
You need an exemption analysis performed to determine whether any of your property is unprotected. Not all unprotected property is going to be sold by the Chapter 7 trustee. The Chapter 7 Trustee makes his or her decision based on how much equity they can get from the sale of the property. So if you have a rental property that has $5,000 in equity, the Chapter 7 Trustee is not likely to pursue that property because after closing costs there would be very little for the Trustee.
Even if you are concerned about some of your property, a Chapter 7 may still be right. Exemptions are extremely important and need to be taken seriously, call our office to schedule your meeting with an attorney to discuss. Remember, in the majority of cases 100% of your property will be protected.
What if I have a business?
Whether you are a sole proprietorship, an LLC, or a corporation, bankruptcy may offer protections to help your business. Your business may be eligible for a reorganization or liquidation and our firm has the experience to help you navigate the bankruptcy process.
Will I Qualify?
Qualifying to file a Chapter 7 depends on your income and expenses. In 2005, the Bankruptcy Code was changed and now requires a financial analysis to be completed. Your financial analysis includes completing the Form B22A (also known as the “Means Test”).
Qualifying is based on median income for your similar household size. If you are below the median income, then you will pass the means test. For example, in Texas the median income for a household size of 4 is approximately $65,000, so if you are below that you pass the Means Test.
If you are above the median income, the Means Test takes into account the following expenses to determine if you qualify: Food, Clothing, Health Care, Housing and Utilities, Vehicle Costs, Taxes, Life Insurance, Mandatory Retirement, Court Ordered Payments and other expenses.
In some instances, the means test won’t apply. If your debts are primarily non-consumer debts (business debt), then you may not be required to complete a means test (so even if your income would not allow you to pass a means test, you may still be able to file a Chapter 7).
Even if you think you make too much money, you need to consult with us, call and schedule a free meeting.
If we can give anyone a piece of advice, try not to get into debt with the IRS. However, if you are already there take a deep breath because there is a way out. Outside of Bankruptcy, the IRS can be very aggressive and make your life extremely difficult. However, in Bankruptcy, the IRS must abide by certain bankruptcy rules that can help you out.
In some cases, depending on how old the IRS debt is and when you filed your tax return, you may not have to repay any of that debt. So, let’s say you owe $10,000 from a tax return you filed 5 years ago. In a lot of cases, you may be able to discharge that debt (essentially have it erased) without having to repay a single cent to the IRS. Again, whether your IRS debt is going to survive your Chapter 7 bankruptcy is going to depend on your specific circumstances, so give us a call and we can complete dischargeability analysis performed.