The decision to file for bankruptcy may be the best option when you are going through financial hardship. When a Chapter 7 filing is completed, it can help with your credit and debt by getting rid of all unsecured debts like medical bills or student loans that have gone unpaid because they were too expensive to pay back. The attorneys at O’Bryan Law Offices in Kentucky will work closely with you as we start fresh together. To discuss your options with a qualified and knowledgeable attorney, call 502-400-4020 today.
What Is Chapter 7 Bankruptcy?
Chapter 7 bankruptcy cases are a lot different than Chapter 13. Chapter 7 doesn’t involve the filing of any plan of repayment. Instead, it’s up to the trustee to gather and sell assets in order for creditors to get paid what they’re owed according to Bankruptcy Code provisions. The debtor’s assets are subject to liens and mortgages that other creditors can claim before the bankruptcy proceedings. The Bankruptcy Code will allow an exception of certain property, but any remaining assets will be liquidated by a trustee appointed for this case. Potential debtors should realize there is risk in filing for Chapter 7, as they may lose some property.
How Does Chapter 7 Bankruptcy Work?
As soon as you file for bankruptcy, the court places an automatic stay on your debts. It is temporary, but it still stops creditors from collecting payments, foreclosing on your home, garnishing your wages, or repossessing your property. The court itself takes possession of your property and appoints a bankruptcy trustee to your case.
The trustee reviews your finances and assets before overseeing your bankruptcy case. They sell nonexempt properties, using the proceeds to pay back your creditors. Additionally, they arrange and oversee meetings with you and your creditors. These meetings occur at the courthouse, and your responsibility is to answer bankruptcy filing questions.
Near the latter half of the process, which occurs around 6 months after filing, the court discharges the remaining debts you have. This means that you no longer need to pay those debts. However, certain debts, like child support, alimony, or court fees, cannot be discharged.
How to File Chapter 7 Bankruptcy?
Filing for Chapter 7 bankruptcy can be a difficult decision. One option is to hire an attorney, but there are also legal aid centers and nonprofit credit counseling agencies that may offer you assistance if needed. Once you determine your eligibility, the process will follow largely the same guidelines regardless of which route you choose or who assists with it.
- Attend counseling. Begin by attending the credit counseling course. Do this within 180 days of filing, unless you qualify for an emergency.
- File the paperwork. List all properties, exemptions, creditors, income, and other financial information. Decide whether you want to pay off your secured debts, continue to make payments on them, or surrender them to the creditor. Pay the fee required to file the form, unless you qualify for a fee waiver.
- Send documents to the trustee. The court accepts your filing. Send the necessary documents to your assigned trustee, who verifies the forms.
- Creditor meeting. Attend this meeting with your trustee and your creditors. Answer all questions about both your situation and the paperwork. Sometimes, creditors opt out of this meeting.
- Attend budget counseling. Within 60 days of the creditor meeting, complete a second course about budgeting from an approved counseling agency. Submit your certificate of completion to the court.
- Wait for your discharge. After the court receives the certificate of completion, they discharge your debts. This takes anywhere from 60 to 75 days after the creditor meeting.
Who Qualifies for Chapter 7 Bankruptcy?
There are certain requirements to meet before you can file for Chapter 7 bankruptcy. We list the requirements for those filing below.
- Complete either an individual or group credit counseling course from an approved agency within 180 days before filing.
- The average of your monthly income for the past 6 months must be less than the median income for a household of your size in your state. Otherwise, you must pass a means test. This test determines if your disposable income is high enough to allow for partial payments to unsecured creditors. However, if you cannot pass the means test, it is likely that you can file for Chapter 13 bankruptcy.
- You cannot have filed for Chapter 7 in the past 8 years.
- You cannot have filed for Chapter 13 in the past 6 years.
- If you filed for Chapter 7 or 13 and the court dismissed your case, you must wait 181 days at least before filing again.
- Even if you meet the above requirements, the court can still dismiss your case if they believe that you are trying to defraud your creditors.
How Long Does it Take for Chapter 7 to be Discharged?
As we stated before, the bankruptcy discharge occurs around 2 months after the creditor meeting. However, certain actions sometimes delay or prevent the discharge. For example, if you fail to complete your budget counseling course, the court cannot grant the discharge. Additionally, if you wait too long, the court might close your case. Below, we include other factors that delay a discharge.
- Someone objects to your discharge. Sometimes, creditors submit written objections to the court. In many cases, they do this if you used a credit card or took on new debts too close to filing for bankruptcy. Trustees also have the ability to object or request a delay. Usually, they do this if you do not provide them with the appropriate information.
- The court schedules a reaffirmation hearing. The US Bankruptcy Code requires the court to both review and approve all reaffirmation agreements not signed by a bankruptcy attorney. Because hearings happened based on the judge’s availability, hearings sometimes do not happen until after the objection period has passed. Even so, the court cannot grant the discharge until this hearing happens.
How Long is the Bankruptcy Process?
The Chapter 7 bankruptcy process usually takes about four to six months. In some cases, it could take longer than that if the trustee has additional documents for you or they need to sell your property in order to repay creditors. There is always a chance at getting student loans discharged in bankruptcy, but this can be difficult and require a lengthy trial.
How Long Is Chapter 7 Bankruptcy on My Credit Report?
Chapter 7 filings majorly hurt your credit for years. For up to 10 years after filing, Chapter 7 remains a detrimental mark on your credit report. Chapter 13, however, lasts for up to 7 years. Accounts included in your bankruptcy filing might fall off of your report earlier. This is because most negative marks are removed from your credit report after 7 years.
Contact O’Bryan Law Offices in Louisville Today
Many people have negative opinions about bankruptcy, but the truth is that it helps countless people finally handle their debts. Working with a Louisville bankruptcy attorney and learning about your bankruptcy options is crucial. At O’Bryan Law Offices, we understand that filing for Chapter 7 isn’t ideal for everyone. However, we also know that it helps families and individuals clean up their debts and credit reports, and get back on their feet financially. The best step you can take is hiring a Kentucky bankruptcy attorney to rebuild your credit and simplify your finances. If you need a qualified attorney, feel free to give us a call at 502-400-4020 for your free consultation.