What can Chapter 7 Bankruptcy do for my debts?




Chapter 7 bankruptcy can discharge most or all of your unsecured debt. Examples of dischargeable unsecured debts are credit cards, medical bills, deficiency from repossessions and foreclosures, and personal loans not secured by any collateral (aka unsecured loans). Chapter 7 does not deal with secured debts, which are debts that are secured by collateral like a car or house. See Chapter 13 Bankruptcy. If you have a wage garnishment, once your Chapter 7 bankruptcy petition is filed, “automatic stay” is in effect, which prevents creditors from further garnishing your wages except for priority debts like child support and alimony. Moreover, once the court granted your case a discharge, the dischargeable unsecured debts will be wiped out and the creditors of the discharged debt CANNOT harass or attempt to collect from you. This is the whole point of a Chapter 7 bankruptcy discharge.

How long does a Chapter 7 Bankruptcy take?

Chapter 7 bankruptcy is a relatively quick process–approximately 3 to 4 months to complete. About 4 to 6 weeks after your petition is filed, you will attend the 341 Meeting of Creditors with an attorney. Assuming everything went well at the 341 Meeting, there is a 60 day administrative wait time for the creditors to raise any objection, which is rare because they need a reason (for example, fraud)—the mere fact that you have not paid your bill is not an adequate reason.

Will I be able to keep my property if I elect a Chapter 7 Bankruptcy?

Contrary to popular belief, you can keep some or all of your assets after Bankruptcy. The point of bankruptcy is to give you a FRESH START, so naturally you need some assets after the bankruptcy. California is one of the states that “opt out” of the federal exemption. There are two statutes that you must choose from: either CCP § 703.140 or CCP § 704, not both. For example, under 704, a single person can exempt up to $75,000 of home equity, $100,000 for married couples or heads of a household, and $175,000 for a person who is disabled or over 65, among other exemptions for other properties. Under 703, for example, you have a $25,340 “wild card” that can be used to protect the assets of your choice that is/are valued up to $25,340, among other exemptions for other properties. Keep in mind these numbers can change. Call for updated figures.

Moreover, there are other types of exemptions that can be used to protect other properties under CCP § 703 and CCP § 704 and more issues (not discussed here) to consider to determine whether Chapter 7 Bankruptcy is the right choice for you. For more information regarding what assets can be exempted in bankruptcy and whether Chapter 7 Bankruptcy is right for you, call today to schedule a FREE consultation with an experienced Bankruptcy Attorney to discuss your option

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