Chapter 7 bankruptcy basics: Chapter 7 bankruptcy allows a quick discharge of most debts while keeping all the property you need.
Whether you are facing overwhelming debt or just want to eliminate debt to be in a better financial position, bankruptcy is a good option.
How do I keep my property in Chapter 7 bankruptcy?
Exemptions! Every state has a list of property that cannot be taken by creditors. Whether a creditor sues you or garnishes your wages, there is certain property that they cannot take. This list of property is “exempt” from being taken by creditors. This is where we get the name “exemptions” – or property described by state law that creditors cannot take.
What property can I keep in bankruptcy? Can I keep my house and car?
Bankruptcy exemptions will include equity in your car and your home. Unless you own your car and house outright, you probably will not have a problem exempting them. Most people who file Chapter 7 are able to keep their car and house through the bankruptcy process if they want to. If you do not want to keep your car or house and they are financed, you can surrender them in the bankruptcy process and owe nothing.
Exemptions will also include property such as household furnishings, which includes your furniture, couch, bed, plates, silverware, TV, and essentially everything you need to live. You can even keep some cash or some money in a bank account. Of course, the measurement of your bankruptcy exemptions is done on the day that you file. No trustee is going to come out to see if you actually have one more end table than you declared, but it is nice to be truthful under oath. Also, if you have some money or property that is not going to be exempt, you will want to make sure that you do not have that money or property on the day you file.
Common questions about exemptions surround retirement accounts, disability, social security, and veteran’s benefits. All of these are exempt. Bankruptcy will not affect these accounts or benefits.
Can I file Chapter 7 bankruptcy?
Probably. Most people do. Nine out of every 10 bankruptcies are Chapter 7. There are several ways to qualify. The U.S. Bankruptcy Court has established a test called the means test. If you pass the means test, you can file a Chapter 7 bankruptcy. However, you automatically pass the means test if you earn less than the mean income in your state. The mean income in your state is determined by the size of your household. For example, if the number of people in your household is three, and you make less than about $50,000 per year from all sources, you qualify. You do not even have to take the means test.
If you make more than the mean income in your state, you can still qualify for a Chapter 7 bankruptcy by passing the means test. The means test takes into account your actual expenses. There are some limitations on your actual expenses, but if there is no money left after subtracting reasonable expenses from your income, you can still qualify for a Chapter 7.
What debts are discharged in Chapter 7 bankruptcy?
Chapter 7 bankruptcy will discharge most unsecured debt that does not receive special treatment like student loans or some taxes. Chapter 7 will also discharge secured debt where the property is surrendered. If you decide to keep the secured property, you will simply have to pay the secured debt.
Unsecured debt includes credit cards, medical bills, store credit cards, and any debt where the creditor will not take property from you if you don’t pay. There are some kinds of unsecured debt that are treated differently by the court. Child support, alimony, student loans, and fines ordered by a court are good examples of unsecured debts that are more difficult if not impossible to discharge in Chapter 7.
Secured debt is when the creditor will take property from you if you don’t pay. Car payments and house payments are examples of payments of secured debt. If you don’t make the payments, the creditor will take the car or the home back. Bankruptcy allows you to decide whether you want to keep these things. If you decide to keep a secured item, you will have to continue making the payments and probably complete a reaffirmation agreement. If you decide to forfeit this property, you can simply stop paying and owe nothing. Secured debt is not dischargeable if you want to keep the property. You cannot discharge the balance on your car loan and still keep the car.
How do I pay for bankruptcy?
It seems like a strange position to be in. I have to file bankruptcy because I don’t have any money, but I have to pay money to file bankruptcy. How can I pay money I don’t have?
Paying for bankruptcy is always one of the more challenging issues with filing bankruptcy. Most bankruptcy lawyers will take payments, but the payments have to be complete before filing. This is to prevent discharging the bankruptcy attorney’s fees in the bankruptcy. Attorney’s fees are unsecured debt and could be discharged just like any other debt.
If you are subject to garnishment or foreclosure, you won’t have time to make payments. In this case, you still have a few options. You could file a Chapter 13. In this case, you will need to find an attorney willing to file the Chapter 13 bankruptcy for little money down. This is risky for the attorney. If you don’t make any payments to the bankruptcy trustee, the bankruptcy attorney will not make any more money than you paid up front.
Another option to pay for your bankruptcy is to sell or finance some property. If you are able to borrow money against some property, and you intend to keep that property, it might be acceptable. You will have to pay the new debt after the bankruptcy. But you would be able to file the bankruptcy right away. Of course, it is always an option to sell some property. Do you have some nice property that a bankruptcy lawyer might like? Taking a loan that you intend to repay against property you intend to keep or selling some other property might also help with property that might be nonexempt. If someone is secured against the property or if you no longer own the property, you will not need a bankruptcy exemption to protect it.
Can I pay for bankruptcy with a credit card?
You are not supposed to, but yes. Paying for a bankruptcy with a credit card could be seen as a fraudulent purchase. After all, if you have no intent to repaying the credit card, you will be getting a free bankruptcy. As a practical matter, the credit card company will likely not file all of the paperwork to challenge the purchase. Even if it does, it likely will settle for a small percentage of the amount you paid your bankruptcy attorney for the bankruptcy. Of course, the bankruptcy lawyer might not accept a credit card payment, and the creditor might ask that your discharge be disallowed. It is probably not worth the risk, but it is possible.
Get Help from a Nevada Bankruptcy Lawyer
It is important to work with an experienced Las Vegas bankruptcy attorney who understands the legal system and how to help you avoid potential traps. Contact us today at 702-997-4149 to schedule a free consultation.