Chapter 7 Bankruptcy

What is Chapter 7

There are two types of bankruptcies that that people like you and me can do. The more common of the two is Chapter 7 bankruptcy.  This is the kind of consumer bankruptcy intended for lower-income people. But if you qualify, you don’t repay your debt. But beware: you could lose stuff.

What does it mean to file a Chapter 7 bankruptcy

Chapter 7 bankruptcy

To file a Chapter 7, it means you need to fill out some paperwork, called the petition, schedules, statement of affairs, and other local forms filed with the bankruptcy court. This starts the bankruptcy process. You sign these documents — about 50-85 pages long — under penalty of perjury. After you complete them, the bankruptcy court gets them.

That’s the filing of the bankruptcy papers. Once filed, you have a case number. The case number protects you from creditors. Creditors are invited to a meeting to ask you questions under oath. The FBI investigates bankruptcy crimes. Overdisclose. You’ll want an Antelope Valley bankruptcy lawyer by your side at this thing.

How do I know if I qualify for Chapter 7

Not everyone qualifies for Chapter 7 bankruptcy. The government only lets people who earn under a certain amount to be eligible for Chapter 7. That is, only people who don’t have the means to pay their debt. There’s a test to find out which people don’t have the means for debt repayment. This is what is meant by the bankruptcy means test.

Is it better to file Chapter 7 or 13?

People ask if it’s better to file Chapter 7 or 13. And like most things you ask a lawyer, it depends. Chapter 7 bankruptcy may look great: you don’t pay anyone and it’s over fast. But there are lots of good reasons to file Chapter 13 too: you keep all your stuff and freeze interest and don’t have to wait as long. Each situation is different. Contact a bankruptcy attorney for some individual advice.

You keep saying I can lose things in Chapter 7. Like what?

It depends. Chapter 7 is liquidation bankruptcy. It’s supposed to be a fair system. They don’t take the shirt off your back. But if you have lots of fancy shirts, they might take them out of your closet. Sit down and talk to a AV bankruptcy lawyer to find out what can be protected in your unique situation. Just for fun, I answer some specific ‘can I keep in Chapter 7‘ liquidation questions.

Fine, I gave my valuable thing to a buddy, problem solved?

Hardly. Now your friend or family member can be sued for a fraudulent transfer.

The 341 Meeting of Creditors

The 341(a) meeting of creditors is a mandatory hearing you attend. You testify under oath. Your creditors get to ask you questions while you’re under oath and can’t lie without risk of going to jail. You will be nervous. You want your lawyer there. Most bankruptcy attorneys from the Antelope Valley or Santa Clarita don’t attend the 341 meeting. But I do.

Do I need to reaffirm debt

Reaffirmation is where you undo what the bankruptcy is trying to do.

Can I can keep my car in Chapter 7. But do I have to reaffirm debt and what’s that all about?  It really depends. Generally, you don’t want to undo what the bankruptcy is trying to do. But there are some instances where you kind of need to. For the life of me I can’t think of a good reason to reaffirm debt for a mortgage that could leave you owing hundreds of thousands if you ever lost the house.

Chapter 7 bankruptcy and Liens

Bankruptcy and liens are another confusing area of the law. Let’s focus on just Chapter 7 and liens. Quick review: Chapter 7 bankruptcy helps discharge unsecured debt. That is, debt with no collateral. But Chapter 7 and liens are different. If you have a secured debt (collateral attached to it), Chapter 7 bankruptcy has no effect on the liens. That’s the rule. As an exception, there is a way to sometimes remove judgment liens in Chapter 7, but this is an additional service that requires an additional contract and yes, an additional fee.

If you don’t tell your attorney about the judgment lien, he or she can’t remove it. If you didn’t pay your attorney extra for removing a judicial lien which you didn’t inform them about, don’t be surprised to find out that he or she didn’t do it. Liens don’t come off in Chapter 7 bankruptcy, but under some situations in Chapter 7 liens can be removed, if you pay extra for the extra work and it’s a judgment lien.