Chapter 7 Bankruptcy

For a free consultation regarding whether Chapter 7 bankruptcy is appropriate for you, please call our office.

Chapter 7 BankruptcyChapter 7 and Chapter 13 bankruptcy each have their place in giving relief to debtors. Chapter 7 bankruptcy, often called a straight liquidation, is about eliminating unsecured debts from the debtor so they can have a fresh start. What is required under Chapter 7 bankruptcy is that any secured debt be maintained and is paid current or surrendered.

There are qualification requirements for Chapter 7 bankruptcy filings. First, the courts look at the median income, which is based on a chart of counties and respective household sizes. This chart will tell you the average or median income for families of various sizes and certain counties.  If the debtor(s)’ income falls at or below this amount, they qualify for Chapter 7 bankruptcy. If, however, the debtor(s)’ income is above the median income for that county and size of household, then we look up what is called the “means test”. The means test is a series of miscellaneous questions designed to determine if one has access to funds to pay back to the court for the benefit of their creditors.  If a person passes the means test, they will also qualify for Chapter 7 bankruptcy. If one qualifies for a Chapter 7, they may wish to still file a Chapter 13 if there is secured debt for which the debtor is delinquent on payments.

Chapter 7 bankruptcy takes about four months in time from start to finish. This is assuming that the debtor(s)’ assets are exempted under the North Carolina or federal exemption statutes. At the end of the bankruptcy, the debtor is offered a discharge, which means unsecured debt has been discharged, or released (“wiped out”), and that the debtor is no longer responsible for those debts.

After the Chapter 7 bankruptcy is complete, the debtor will be able to get credit, but not at the rate as someone who has not filed for bankruptcy protection.  The first year is the worst, but the further the debtor gets in time from the bankruptcy filing, along with any proactive moves to improve their credit, the better their credit score and ability to get new credit.

For a free consultation in Huntersville, North Carolina regarding whether Chapter 7 bankruptcy is appropriate for you, please call our office at 704-584-4111.