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Chapter 7 Gives the Fresh Start You Need Chapter 7 discharges you from your obligation to pay debts. This means the debts are forgiven, and you have no legal obligation to pay them. The Chapter 7 discharge applies to most common types of debt, including credit cards, medical bills, judgments, past due rent, vehicle loans and some IRS and State taxes. Non-dischargeable debts include alimony, child support, student loans, most taxes (less than three years old) and restitution. For a specific answer as to how one of your creditors will be treated in Chapter 7, contact our office for a free phone consultation.
The Automatic Stay — Your Injunction Against Creditors
The Chapter 7 process results in a discharge of your debts. Your case strategy is designed to protect your wages, home, vehicle and business. Upon Filing of the Chapter 7, an automatic stay is issued. The automatic stay is a court order which stops hostile creditor actions such as:
- Wage garnishments
- Foreclosures or sheriff’s sales
- Collection lawsuits
- Landlord-Tenant suit
- Insurance claims against your driver’s license
- Garnishments of your tax refund
- Phone calls, mailings, or other collection tactics
These Actions Stop Immediately. You Never Pay the Creditors Again.
In over 2,000 cases, a client has never lost their home, provided they make the payment. Filing BANKRUPTCY does not cause you to lose your home. Renters and homeowners are, both are allowed to keep their home if the payments are made. If you have a mortgage, you must also keep up-to-date insurance, and pay the property taxes. If you are behind on your mortgage, then you need to file a Chapter 13, which provides up to five years to catch up the payments. If you have a mobile home on a lot, we have been very successful in reducing the principal balance to an amount equal to the home’s value. Contact our Traverse City office for a phone consultation to determine if your contract balance can be reduced.
If you own the vehicle, free of any liens, you will keep it. If there’s a lien on the vehicle, either give it back, or reaffirm the debt. You will keep your vehicles, motorcycles, trailers and 4-wheelers if you own them free of liens. There are Bankruptcy laws that protect such items from liquidation. If the property has a lien on it, your creditor wants you to keep it. Personal cars, trucks and some motorcycles are kept by the Debtors when they file Chapter 7, provided the payments are kept current, and the vehicle has full-coverage insurance.
Reaffirming a Vehicle payments inChapter 7 bankruptcy binds you to pay the full contract balance. So, if you owe $15,000 on a vehicle worth $5,000, you will have to pay the $15,000 at the normal payment. Keep in mind, if the vehicle breaks down, you still have to pay the full contract value, if you signed a reaffirmation agreement.
Surrendering a Vehicle happens when the Debtor cannot afford to make the payment, or the vehicle is no longer needed. Typically, you can use the vehicle for about 45 days after the case is filed, if it properly insured. If you intend to give the vehicle back, you are not obligated to make the payment after filing Chapter 7.
Income and Retirement Savings
As a Chapter 7 Debtor, you do not have to pay anything to the creditors. You keep all of your wages, accounts receivables, 401K’s, profit sharing, IRA’s and all other sources of income. This property is exempt from liquidation by the Chapter 7 Trustee. Your privacy is maintained as much as reasonably possible, so you are able to maintain your income and get a fresh start.
Chapter 7 Means Test In order to be eligible for Chapter 7, you must meet certain income qualifications. These qualifications are based on a means test, which was designed by the U.S. Bankruptcy Trustee’s Office in 2005. Typically, if your household income falls below the median household income, you are eligible to file for Chapter 7 bankruptcy. If your household income is above the median, then you may have to file a CHAPTER 13 case.
As an experienced Bankruptcy Lawyer, Patrick Fragel can review your budget to determine if you are eligible for a Chapter 7, despite your higher household income. There are several reasons why a Debtor with a high household income may still quality for a Chapter 7. The computations are complex, and each case is special. Contact our Traverse City office for a phone consultation to determine if you qualify for a Chapter 7.
Call Attorney Fragel With Your Chapter 7 Questions Patrick has been a Bankrupty Attorney in Traverse City and the surrounding areas for more than 20 years. You can rely on his knowledge of the Chapter 7 law to protect your property and income. If you are considering Chapter 7 or Chapter 13 bankruptcy, call Patrick for straight answers. CONTACT US today.