FAQs About Chapter 7 Bankruptcy

Nearly 4 out of 5 Americans live paycheck to paycheck, which means even a small unanticipated expense or a single week of missed work is enough to threaten most families’ financial security. If circumstances beyond your control have left you in an overwhelming amount of debt, filing for chapter 7 bankruptcy could provide a much-needed fresh start.

Here are the answers to some of the most frequently asked questions about Chapter 7 bankruptcy:

1. Am I Eligible for a Chapter 7 Discharge?

Chapter 7 bankruptcy was designed to help people with little to no disposal income. As such, it’s usually only available to debtors who earn less than their state’s median income for a household of their size. If your earnings exceed this income level, you may still qualify, but you would have to pass a means test first.

Having a qualifying income or passing a means test isn’t the only eligibility requirement. If one of the following applies to you, it might not be possible to secure a chapter 7 discharge:

• You were granted a chapter 7 discharge within the past eight years; or
• You were granted a chapter 13 discharge within the past six years (unless you’ve since paid off at least 70 percent of applicable unsecured debts).

You can confirm your eligibility by consulting a bankruptcy attorney before filing the initial petition.

2. Can Chapter 7 Eliminate All My Debt?

Chapter 7 bankruptcy can discharge many kinds of debt including:

• Credit card balances;
• Medical bills;
• Collection agency accounts;
• Past due utility bills; and
• Past due rent.

Unfortunately, there are certain kinds of debt that chapter 7 bankruptcy cannot discharge. Examples include:

• Past due child support;
• Past due alimony;
• Student loans;
• Certain criminal fines, fees, and penalties;
• Tax debts from the prior three filing years;
• Debts obtained by fraudulent means; and
• Debts incurred by causing bodily injury or death while operating a motor vehicle under the influence.

3. How Does Chapter 7 Differ from Chapter 13?

While chapter 7 bankruptcy liquidates non-exempt assets to pay back creditors, chapter 13 requires petitioners to implement a three- to five-year repayment plan. As such, chapter 13 is often a valid alternative for those who don’t qualify for chapter 7 because they earn too much money.

4. How Long Does It Take to Complete Chapter 7 Proceedings?

Chapter 7 proceedings can be completed within a matter of months. The general steps for obtaining a discharge are as follows:

• Gather essential documents;
• Complete credit counseling;
• Fill out the petition;
• File the petition in court;
• Attend the meeting of creditors; and
• Surrender any nonexempt assets to the trustee.

Assuming there are no issues or complications, you will receive a notice from the court that your debts have been discharged a short while after the liquidation has been completed.

Speak with a Jackson Bankruptcy Attorney Today

To find out if you may be eligible for chapter 7 bankruptcy, contact Brown Bass & Jeter, PLLC. Our attorneys have 40 combined years of experience in legal practice. Call 601-487-8448 or fill out our Contact Form to schedule a consultation with a bankruptcy lawyer in Jackson.