Chapter 7 Bankruptcy is what’s known as the “liquidation” bankruptcy. It is a process where you as the debtor will surrender to the Bankruptcy Trustee your non-exempt assets. The Bankruptcy Trustee will then sell (liquidate) these assets and use the sales proceeds to pay the debts you owe to your unsecured creditors, such as credit card debt, medical treatment debt and an installment contract debt like a gym membership. At the end of the process, any unsecured debt that was not satisfied by the sale of your assets will be discharged, or wiped out, i.e. you will get a financial “fresh start”, and not be obligated to pay any more money towards these discharged debts. Debts that are secured by assets or collateral, such as a home loan (mortgage), auto loans or appliance financing, however, are not completely discharged in Chapter 7 unless you give up the asset or collateral. If you fail to continue paying towards secured debt, the creditor can repossess the asset or foreclose on it. Chapter 7 Bankruptcy will wipe out your obligation towards the secured debt whereby the creditor will not be able to sue you for the difference of the amount owed even if the value of the repossessed or foreclosed asset was worth less than the debt owed. On the other hand, if you do not want to lose the asset, then you must agree to reaffirm the debt where this debt will not be discharged and you will be responsible for the full amount of the debt owed. Please contact the seasoned professionals at Ananian Law Group immediately in order to assist you in wiping out your overwhelming debt and giving you a financial fresh start. We are a debt relief agency and assist people file for relief under the Bankruptcy Code.

There are some types of debt that cannot be discharged in Chapter 7 Bankruptcy and will be enforceable against the debtor even after the debtor receives a bankruptcy discharge. These debts include child support obligations, certain unpaid Federal and State income taxes, criminal fines and restitution, debts owed to governmental agencies, educational loans unless repayment creates an undue hardship, debts obtained through fraud, and personal injuries/death caused by debtor’s intentional tort (battery, assault, false imprisonment) or during the debtor’s operation of a vehicle while intoxicated.

Prior to 2005, consumers frequently chose, and were easily qualified, to file Chapter 7 Bankruptcy, thereby completely wiping out their unsecured debts, all the while leaving creditors with major losses. In order to curb the number of Chapter 7 Bankruptcies and prevent abuse of the bankruptcy process, United States legislators revised the United State Bankruptcy Code in 2005 by passing the Bankruptcy Abuse Prevention and Consumer Protection Act (“BAPCPA”); thus making it more difficult for consumers to file Chapter 7 Bankruptcy. Now in order to be eligible for Chapter 7 Bankruptcy, consumers need to pass what’s called the Means Test. The first step in the Means test is determining if most of the debt owed is consumer debt, i.e. debt that is not business related or taxes owed. Credit card debt, utility debt and housing debt are considered consumer debt. If more than 50% of your debt is non-consumer debt, then you do not need to continue with the Means test. You are automatically qualified to file Chapter 7 Bankruptcy. If your debt is primarily consumer debt, then you must go to the next step, i.e. the Median Income Test. The Median Income Test requires you to determine if your annual income is below the median income in your State. If your income is below your State’s median income, then you can stop right there. You again qualify for Chapter 7 Bankruptcy and no longer need to continue with the Means Test. If your income, however, is above the median income, then you must proceed. You must now gather all of your “allowable” expenses such as rent, groceries, utilities, clothing, medical expenses, etc. What is allowable is subject to national and local standards used by the IRS. Subtract these allowable expenses from your income. What is left of your income after all of your allowable expenses is deemed disposable income. It is this disposable income that will be used to pay portions of your debt. If your disposable income is low enough, you may still qualify for Chapter 7 Bankruptcy; otherwise, you are not eligible for Chapter 7 and may be required to file Chapter 13 Bankruptcy. Chapter 13 Bankruptcy is known as the wage-earner’s plan. In a Chapter 13 Bankruptcy, a payment plan will be prepared where your disposable income will be used to pay your creditors. The Chapter 13 payment plan is usually a payment plan that is over a period of 3 to 5 years. Please contact the seasoned professionals at Ananian Law Group immediately in order to assist you in determining whether you qualify for a Chapter 7 or 13 Bankruptcy. We are a debt relief agency and assist people file for relief under the Bankruptcy Code.

There is no question that if you file Bankruptcy, your credit score will drop. However, that is exactly what is happening by not paying your debts anyway. At least with Chapter 7 Bankruptcy, you will get the benefit of the Automatic Stay, which will stop your creditors or debt collectors from contacting you and harassing you in order to collect on the debt you owe. This alone will relieve debtors from a lot of stress and allow them the ability to compose themselves and eventually get back on their feet sooner. If you are still worried about your credit score dropping due to Bankruptcy filing, you shouldn’t. Bankruptcy may actually help your credit get repaired and improved much quicker than if you do not file. Moreover, creditors know that if you file Bankruptcy, you will not be able to file again for a few years and will be more likely to extend you credit than if you do not file Bankruptcy. It is also important to note that filing Chapter 7 Bankruptcy, where you do not pay anything towards your unsecured debt and where all of the unpaid debts you owe will be discharged, will drop your credit score more than if you file Chapter 13, where you end up paying some of your debt back. If you need further assistance or have additional questions regarding Bankruptcy, please contact the professionals at Ananian Law Group to help you. We are a debt relief agency and assist people file for relief under the Bankruptcy Code.

Normally, student loan debt is not dischargeable in Chapter 7, or even Chapter 13 Bankruptcy, unless you can establish that without the discharge the student loan debt will create an undue hardship on you, i.e. where you will not be able to maintain a minimal standard of living, your hardship will continue for a significant percentage of time of the loan payment period, and prior to filing bankruptcy, you made a good-faith effort to repay the loan.

Despite what you may have heard in television or print ads, most tax debt is not dischargeable in Chapter 7 Bankruptcy; and a Chapter 13 Bankruptcy repayment plan will require you to pay the debt in full during the repayment plan period. There are situations, however, where you may be allowed to discharge certain tax debts owed, except for payroll taxes or tax fraud penalties which are never dischargeable. In order to qualify for a tax debt discharge, you need to satisfy the following requirements: Tax debt was for income tax You did not commit fraud or intentionally try to evade paying taxes The taxes owed were due at least 3 years before filing Bankruptcy You filed a tax return for the taxes owed at least 2 years before filing Bankruptcy; and The IRS assessed the taxes you owed at least 240 days before you filed Bankruptcy, which is usually close to the date you filed your tax returns. If your tax debt does not qualify for a Chapter 7 discharge, then you may be eligible for a Chapter 13 repayment plan where you will be allowed to pay off the tax debt over a 5-year period. Moreover, tax collection efforts will stop, a tax lien being placed on your property will stop and the IRS or the State will be prevented from seizing your assets, including your bank account, or garnishing your wages in order to pay off the tax debt. Please note that a Chapter 7 Bankruptcy will not discharge a tax lien that has already been pre-recorded. Chapter 7 Bankruptcy only discharges your personal responsibility to pay the debt, i.e. it does not discharge or terminate liens. Once a tax lien has attached to your property, you will have to pay it off before you sell the property. Please contact Ananian Law Group today to determine if your tax debt will be discharged in Chapter 7 Bankruptcy. We are a debt relief agency and assist people file for relief under the Bankruptcy Code.