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Chapter 7 Bankruptcy

The two most common forms of bankruptcy are Chapter 7 and Chapter 13. Chapter 7 is a straight get-rid-of-your-debts bankruptcy, and Chapter 13 is a payment plan. Chapter 7 is more common and is the best solution for most people. However, for some Chapter 13 is clearly the better solution, so be sure to look into that too. For information about the reasons you might want to file Chapter 13 instead of Chapter 7, please read the article on Chapter 13.

Chapter 7 is that it gets rid of most debts. Credit cards, medical bills, bank loans, and other common debts vanish, but some debts can still be collected from you even after a Chapter 7 discharge.

The most common examples of debts that survive bankruptcy are:
  • Recent taxes
  • Student loans
  • Child support and alimony
  • Property obligations from the divorce decree
  • Criminal fines or restitution
  • Some debts involving fraud

    • Yes, even old taxes may be dischargeable in bankruptcy. Income taxes can be discharged if they are more than three years old and comply with several other rules. Call us at (651) 639-0313 to discuss your situation. Most people have all their debts except student loans and recent taxes discharged.

      While it is technically possible to discharge student loans if they are an "undue hardship", the standard of proof is very high and most people cannot meet it. There is legislation pending in Congress which may make some student loans more easily dischargeable. Watch the newspapers.

      You may have heard that there is a means test which prevents some people from filing bankruptcy. This is true, however the great majority of people that are in enough trouble to consider filing bankruptcy qualify. Perhaps the most important thing to know about the means test is that it is calculated in a strange way which means that in some cases timing can be extremely important. You might be able to file a Chapter 7 bankruptcy in July but not allowed to do so in August, for example. Call us at (651) 639-0313 and will explain that to you in more detail. You can also look at the bankruptcy facts tab which provides more details.

      Another reason to talk to a bankruptcy lawyer early is that many things that seem obviously correct to the average person can be big trouble in bankruptcy. For example, your creditors may be penalized if you pay them too soon before you file bankruptcy. This is generally not as much of a problem for the credit cards as it is for your friends and family members. If you pay them too soon before you file bankruptcy, the trustee is likely to demand the money back from them.

      Many people think that they lose everything they own if they file bankruptcy. This is not true. Everyone is allowed exemptions that allow them to keep property even though they file bankruptcy. Most people find that the exemptions are broad enough to cover everything they own. As a result, most people lose nothing when they file bankruptcy. Please call us at (651) 639-0313 to discuss whether your property would all be exempt or not.

      There are people that will lose property if they file bankruptcy. In some cases they don't care because they're getting rid of so much debt that the property they lose is a small price to pay. It may be possible to protect nonexempt property, but you need to be very careful how you do it. Transferring property to someone to hold for you before you go through bankruptcy is definitely the wrong way to do it. Exemption issues are complex and need to be discussed with a bankruptcy lawyer.

      Very few people want to file bankruptcy. This reluctance is so strong and most people wait much too long to file. Often they spend savings and pension plans in an effort to keep current on the credit cards, but are unable to do so and need to file bankruptcy anyway. If you have the ability to pay your bills, you should. But if you find that there is no light at the end of the tunnel, spending your savings or pension plan in an effort to temporarily keep the cards happy leaves you in a very vulnerable position.

      Remember, we're here to help you, not to judge you. We are friendly and easy to talk to, and we don't charge you anything for the call. Call us 24/7 at (651) 639-0313. We don't answer the phone in the middle of the night, but our voicemail does. We will be happy to call you back.

      Chapter 7 Bankruptcy

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