What Debts Are Discharged In Chapter 7 Bankruptcy
A Chapter 7 bankruptcy will generally discharge your unsecured debts, such as credit card debt, medical bills and unsecured personal loans. The court will discharge these debts at the end of the process, generally about four to six months after you start.
Some types of unsecured debts usually aren’t discharged through a Chapter 7 bankruptcy, including:
- Child support
- Personal injury debts you owe due to an accident while you were intoxicated
- Unsecured debts that you intentionally left off your filing
Your creditor could also object and keep certain debts from getting discharged. For example, a credit card company could object to the debt from recent luxury goods purchases or cash advances, and the court may decide you still need to repay this portion of the credit card’s balance.
Additionally, a Chapter 7 bankruptcy may discharge the debt you owe on secured loans. Secured loans are those backed by collateral, such as your home for a mortgage, or when a creditor has a lien on your property. However, even if the debt is discharged, the creditor may still have the right to foreclose on or repossess your property.
Bankruptcy In America: The Big Picture
Although you might not care much about the larger bankruptcy picture, understanding it will help you keep your situation in perspective. For many, its reassuring to know that youre not alone in your financial strugglesand because youre reading this edition, youre likely one of the millions impacted by COVID-19. As youll see below, a global pandemic isnt a reason in itself for bankruptcy. Instead, it exposes far more people to typical financial insecurities leading to bankruptcy.
Why People File For Bankruptcy
Historically, these are the most common reasons for filing for bankruptcy:
- job loss, followed by an inability to find work that pays nearly as well
- medical expenses that arent reimbursed by insurance or government programs
- divorce or legal separation, and
- small business failures.
Once a financial catastrophe strikes, many of us wind up taking on significant debt just to weather the storm. If we saved enough, maybe wed be ready for these unexpected twists and turns. But, for a variety of reasons, many of us arent prepared. Lets take a closer look at how we become so financially overextended.
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Why Use A Bankruptcy Petition Preparer
A good bankruptcy petition preparer will have up-to-date bankruptcy computer software that will generate the documents quickly and relatively easily. And most bankruptcy petition preparers charge low fees, especially compared to lawyers.
Bankruptcy law requires bankruptcy petition preparers to follow these business practices:
- provide a written contract defining their services and fees
- provide written disclosures summarizing the different kinds of bankruptcy and the associated procedures
- identify themselves as debt relief agencies providing services under the federal bankruptcy code
- not charge an unreasonable fee
- not collect or handle the bankruptcy filing fees or other court fees
- file a fee disclosure statement with the court
- include their name and social security or tax identification number on the documents they prepare, and
- not use, or advertise with, the word “legal” or any similar term.
People who help others for free are not subject to these rules.
Whether You Should File For Bankruptcy Without An Attorney Depends On The Type Of Bankruptcy And The Complexity Of Your Case
By Cara O’Neill, Attorney
You don’t need an attorney when filing individual bankruptcy, and filing on your own or “pro se” is feasible if the case is simple enough. But most people benefit from representation. In this article, learn:
- when Chapter 7 is too complicated to handle yourself
- why hiring a Chapter 13 lawyer is always important, and
- if you represent yourself, how a bankruptcy petition preparer can help.
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Does Chapter 7 Bankruptcy Make Economic Sense
If you are leaning toward filing for Chapter 7, take a moment to consider whether it makes economic sense. If filing for Chapter 7 wont help with your current debt problems or will force you to give up property you want to keep, then Chapter 7 might not be the best option.
FOR MARRIED COUPLESIf you are married, consider the debts and property of both spouses as you read this section. Married couples usually benefit from filing jointly, but not always. For example, if one spouse brings a lot of debt to the marriage while the other spouse has clean credit, it might make more sense for the debt-ridden spouse to file alone. Filing alone might also be a good idea if one spouse is barred from filing due to a previous bankruptcy. It would also be prudent if filing together would put the nonfiling spouses separate property at risk or if the couple holds property as tenants by the entirety. Youll find more information on the benefits of filing jointly versus filing alone in Ch. 6.
The Bankruptcy Law: A Work In Progress
On October 18, 2005, a new law took effect that substantially changed the bankruptcy system. Shortly afterward, The New Bankruptcy hit the bookshelves. Now, sixteen years later, the fledgling law is no longer new. This ninth edition accounts for the many court interpretations and rules that have put the 2005 law into effect. During that period, we have explained the rights and duties in Chapter 7 and Chapter 13 bankruptcies for many bankruptcy filers. This edition reflects the advice and information weve provided regarding how bankruptcy works and which type of bankruptcy is best for each individual.
More specifically, this book explains how eligibility for Chapter 7 and Chapter 13 bankruptcy is determined, what debts are canceled , what happens to your home, car, and other property, what complications might occur, the paperwork involved, and where you can find help with your bankruptcy. Taken together, this information will help you decide whether it makes sense to handle your debt problems through bankruptcy and, if so, which type of bankruptcy is the best choice for you.
When there are important changes to the information in this book, well post updates online, on a page dedicated to this book:
You will find other useful information there, too, including author blogs, and forms.
Special Rules for Multiple Filers
The Bankruptcy Trustee
The Bankruptcy Trustees General Duties
The U.S. Trustees Office
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Complete The Bankruptcy Forms
The bankruptcy forms include at least 23 separate forms, totaling roughly 70 pages. The bankruptcy forms ask you about everything you make, spend, own, and owe. Youâll also include some bankruptcy basics, like what type of bankruptcy youâre filing under and whether a bankruptcy lawyer is helping you.
If you hire a lawyer, they will complete the forms for you based on the information you submit to their office. If you can’t afford to hire a lawyer but don’t feel comfortable completing the forms on your own, see if you’re eligible to use Upsolve’s free online bankruptcy service or schedule an appointment with a legal aid provider in your area.
Will Bankruptcy Discharge Enough Of Your Debts
Specific categories of debts will survive Chapter 7 bankruptcy, depending on the circumstances. It might not make much sense to file for Chapter 7
bankruptcy if your primary goal is to eliminate these nondischargeable debts.
There are three categories of nondischargeable debts:
- debts that always survive bankruptcy
- debts that survive bankruptcy unless you convince the court that a particular exception applies, and
- debts that survive bankruptcy only if a creditor mounts a successful challenge to them in bankruptcy court.
If most of your debts will survive bankruptcy, hold off on filing Chapter 7 until you have at least read Ch. 9 and learned what is likely to happen to these debts in your case. In particular, you should be concerned about:
- back child support and alimony
- nonsupport debts arising from a marital property settlement agreement or divorce decree
- student loans
- government fines, penalties, or court-ordered restitution
- tax arrearages , and
- court judgments for injuries or death resulting from your drunk driving convictions.
The following types of debts can survive bankruptcy, but only if the creditor mounts a successful challenge to them in the bankruptcy court:
Purchase this book and access its’ dedicated webpage to:
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How Does Chapter 7 Bankruptcy Affect My Credit Score
Weve covered this topic in more detail in our article what does bankruptcy do to my credit score?. More often than not, debtors report an INCREASE in their credit score after filing for bankruptcy. How can this be possible? At ARM Lawyers, we do more than simply help you eliminate your debt. We will work with you to rebuild your credit score after bankruptcy! After your Chapter 13 Plan is confirmed, we will enroll you in the 7 Steps to a 720 Credit Score program FOR FREE. This $1,000 program is available to my clients FOR FREE just for being my client.
How Long Does A Chapter 7 Bankruptcy Stay On Your Credit Report
A Chapter 7 bankruptcy is a major derogatory mark that can hurt your credit for years to come. The Chapter 7 bankruptcy record can stay on your credit reports for up to 10 years from the filing date, and a completed Chapter 13 bankruptcy can remain on your credit report for seven years from the filing date.
The accounts that were included in your bankruptcy may fall off your credit report earlier, as most negative marks get removed after seven years.
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Objections By The Trustee
The most common objections raised involve acts by the borrower to hinder, delay, or defraud a creditor. An example of this may include, gratuitously transferring assets to a family member within 1 year of filing for bankruptcy. See In Re Emmett. To deny a discharge under these grounds, there must be proof the debtor acted with fraudulent intent. Merely proving the events occurred is not enough. The court must provide sufficient evidence the debtor acted with the intent to hinder, delay, or defraud a creditor. See In Re Miller. In determining whether or not the debtor acted with the requisite intent, the court will consider many factors, such as:
- Lack or inadequacy of value received by the debtor in exchange for the assets given
- Relationship between the parties
- Financial condition of the debtor both before and after the transaction
- Existence of a pattern or series of suspicious transactions
- General chronology of the events and transactions
What Should I Expect From A Lawyer
If you hire a lawyer, make sure your lawyer is an experienced bankruptcy lawyer. Bankruptcy is a complex, unique area of law that is not something that a general practitioner can learn overnight. Ask your lawyer how many bankruptcies they have filed.
Your lawyer will probably have you fill in a questionnaire about your property, debts, expenses and income. A good lawyer will be able to determine quickly what kinds of debts will be dischargeable in bankruptcy. The lawyer should advise you to get credit counseling before you file, and will may even have a computer terminal in their office where you can do the counseling right there, online. Many lawyers have preferred credit counselors that they work with.
Lawyers are responsible for making sure that your information is accurate, so they will be asking you to bring in documentation about your finances, including pay stubs, tax returns, etc.
For more information about working with a bankruptcy attorney, check out Chapter 10 of How to file for Chapter 7 Bankruptcy.
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Mail Documents To Your Trustee
The Chapter 7 trustee is an official appointed by the court to oversee your case and liquidate, or sell, nonexempt property for the benefit of your creditors. Not all types of bankruptcy require the involvement of a bankruptcy trustee, but both Chapter 7 and Chapter 13 cases have one.
Pay attention to mail you receive from the trustee after filing your case. The trustee will send you a letter asking you to mail them certain financial documents, like tax returns, pay stubs, and bank statements. If you donât send the trustee the requested documents following the instructions provided in their letter, you may not get a discharge of your debts.
How To File Chapter 7 Bankruptcy In Florida
Chapter 7 bankruptcy is designed to eliminate debt and give borrowers a fresh start. The Chapter 7 process is the shortest termed bankruptcy that you can file. A Chapter 7 case typically takes about 90 days, depending on how many assets and creditors you have. There are a lot of potential benefits to Chapter 7, but without solid legal advice, there may be unwanted consequences. If you are considering Chapter 7 bankruptcy, you should contact a Tampa bankruptcy law firm for a consultation.
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Schedule D: Creditors Who Hold Claims Secured By Property
A secured claim is a loan or obligation for which you have pledged a piece of property as collateral. If you fail to pay the obligation, called “defaulting,” the creditor typically has a right to take back the property through foreclosure or repossession. The most common examples of secured claims include your mortgage and car loan.
Schedule D is where you list all of the secured claims encumbering your property. When you fill out Schedule D, include the creditor’s name and contact information, the nature and amount of the lien, date it was incurred, and the description and value of the property subject to the lien. If the lien amount exceeds the value of the property, list the difference in the unsecured portion column.
Talk To A Bankruptcy Lawyer
Need professional help? Start here.
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Experienced Chapter 7 Bankruptcy Lawyer In Olathe Ks
If you are facing mounds of debt and being constantly contacted by creditors, youve come to the right place. At Wiesner & Frackowiak, LC, we are bankruptcy attorneys who can help you understand your options and find you solutions. We specialize in tax problems, back taxes, garnishment, foreclosures, repossessions, credit card debt, medical debt, and chapter 13 and chapter 7 bankruptcy.
To discuss your options and learn how to move forward, get in touch with our team in Kansas City, MO Overland Park, KS or Olathe, KS.
What Chapter 7 Bankruptcy Can Do for You
Bankruptcy can be a scary word mostly because many dont fully understand it or the benefits that come from filing it. The attorneys at Wiesner & Frackowiak, LC, take the time to ensure that you completely understand bankruptcy and how it can help you.
No Garnished Wages
Stop Creditor Calls
Once you have filed with our chapter 7 bankruptcy attorney, well stop creditors from calling you. With our help, you wont have to face calls at home, at work, or anywhere else from any creditors to whom you owe dischargeable debts.
Gain Freedom From Debt
After you complete the bankruptcy process, any dischargeable debt will be taken care of. You will be free from the heavy burden you were dealing with before you called us.
When you call, well set up an appointment for the same day or the next business day. After we meet with you, we can file a chapter 7 bankruptcy for you within 24 hours.
How You Can Contact Our Team
What Do You Lose And What Can You Keep In Chapter 7 Bankruptcy
If you file for Chapter 7 bankruptcy, you may lose your nonexempt belongings, property that has a lien on it and property you offered as collateral for a loan.
Examples of exempt property based on current federal limits for an individual include:
- A homestead exemption of $25,150
- Up to $4,000 on a vehicle
- Up to $1,700 in jewelry
- Up to $13,400 in personal property, such as books, household items, and clothes
- Funds in tax-exempt retirement accounts, such as a 401 or 403 accounts, and up to $1,362,800 in combined savings in IRAs and Roth IRAs
- Public benefits, such as Social Security, veterans benefits and unemployment
- Up to $2,525 in books and tools of trade
- Alimony and child support
- Certain insurance benefits
- An additional $1,325 in property of your choice, plus up to $12,575 of unused funds from your homestead exemption
Double these amounts if you’re married and file a joint tax return. Keep in mind that states may have different exemptions and limits that you can use when filing bankruptcy. For example, the homestead exemption for a single homeowner living in California starts at $75,000, but is unlimited in some other states.
A trustee can’t take property when its value is less than the exempt amount, which means you may be able to keep your home and vehicle.
A similar scenario could play out with other forms of secured debts, such as an auto loan. However, just because the trustee can’t take and sell these assets doesn’t mean you’ll get to keep them in the long run.
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