The personal bankruptcy attorneys at Dennery Law know that you work hard to keep your promises to your creditors, and that you are vigilant about your credit score. If you are like most of our clients, you probably dream of a better future where, for example, you could finance a vehicle when you need it through a loan with reasonable interest rates. Debt collectors and debt settlement companies also know that folks like you work harder to make things work when under the pressure of payment plans that you can never hope to afford. Most people would do just about anything to avoid filing for chapter 7 bankruptcy because they see bankruptcy as a failure. More and more, folks are realizing that making minimum payments on consumer debts while struggling to stay current on day-to-day expenses is no way to live - you are a prisoner to a vicious cycle of catching up just to fall behind. Our clients make the decision do something different and to start fresh with a chapter 7 bankruptcy.
Chapter 7 Personal Bankruptcy
Chapter 7 bankruptcy offers debt relief to individuals who have tried everything, but are not able to keep up with their creditors while staying current with their everyday expenses. Filing for Chapter 7 provides immediate relief from virtually all creditor actions, including collection calls, lawsuits, evictions, utility disconnects, judgments, garnishments, and/or imminent foreclosures or repossessions. Our clients take advantage of the immediate relief provided by the bankruptcy automatic stay to regroup and recover, and to work on achieving a fresh start.
Dennery Law helps individuals obtain debt relief under the bankruptcy code. Let’s talk about your
debt and how an experienced bankruptcy attorney can help you start fresh. We are available for
telephone consultations at no charge to you. In-person or remote appointments are available on
weekdays, evenings, and weekends in Lexington, Louisville, and Northern Kentucky.
What Is Chapter 7 Bankruptcy?
Under chapter 7 bankruptcy, a court-appointed trustee assesses the value of your personal and real property to determine if general unsecured creditors would receive any distributions from the liquidation of your assets. in a personal chapter 7 case, you are entitled to claim personal exemptions, which allows you to protect your property from liquidation. Bankruptcy personal exemptions apply to among other things:
- Automobiles
- A portion of the equity in your personal residence
- Your clothing, furnishings, and household goods
- Jewelry, up to a certain value
- Pensions and retirement account (no limitations)
- Tools of the debtor’s profession, up to a certain value
- damage awards for personal injuries suffered before or after the bankruptcy case is filed.
The trustee 7 Trustee has the legal authority to liquidate non-exempt assets to pay off your general unsecured creditors. However, the large majority of Chapter 7’s are “no-asset cases.” Typically, the Chapter 7 Trustee “abandons” your property and enters a “report of no distribution,” which means that you keep all of your property and that your general unsecured debts are completely wiped out. You keep your home, vehicles, and personal property. You get a fresh start after the case is completed, which happens within three to five months from the time that you file your case.
Chapter 7 Wipes Out All Unsecured Debts, Including:
- Credit card debt
- Medical bills
- Unsecured personal loans
- Old utility, cable, and wireless bills
- Other accounts that are in collections
Do I Qualify For Chapter 7 Bankruptcy?
Individuals and married couples with “below-median income” (as determined under IRS Standards) should feel confident about qualifying to relief under Chapter 7. Your income is calculated as your gross household income from wages, rental or business income, pensions and retirement plans, and/or unemployment benefits. So long as it is less than the median income for a family of similar size, you are eligible for chapter 7.
The Means Test
If your income is above median income, you can still qualify for a Chapter 7 bankruptcy, so long as you can show that you cannot afford to pay your general unsecured creditors after meeting your reasonable day-today expenses. Expenses for medical care, secured debt related to your mortgage or car, and expenses for childcare are accounted for in what is known as the Means Test. Whether you qualify for Chapter 7 under the Means Test is a mathematical formula. Just add up the gross monthly income for all wage earners in your household and subtract from that your monthly expenses, including payments on secured debt.
Can I Keep My Home and My Car?
The purpose of bankruptcy law is to help you start fresh, not to leave you with nothing. On the contrary, you can keep your home and your vehicles even after filing for a chapter 7 bankruptcy. Typically, general unsecured debts such as credit cards, medical bills, and personal loans, are wiped out without issue. Your personal liability to your mortgage company or car lender is also wiped out. However, bankruptcy does not affect the lien held by your secured creditors against collateral such as your vehicle or your residence. Secured creditors maintain their their right to enforce your promise to pay against your home, in the case of a mortgage, or against your vehicles in the case of a car loan. So long as you as you pay on time you can keep your property and avoid a repossession or a foreclosure.
If you are making timely car or mortgage payments, you can renew your personal obligations to your secured lenders under a “reaffirmation agreement” which is entered into with your creditor before the completion of the case. On the other hand, if you are not sure about how long your vehicle is going to last, or cannot afford the monthly mortgage or car payments, you can surrender the property and break free from the related monthly payments and personal liability once and for all.
Does a chapter 7 ruin my credit score?
What ruins an individual’s credit score more than anything is high credit card balances, late payments, and charge offs. Indeed, your payment history counts for about 35 percent of your FICO score, while your available credit limit makes up to 30 percent of your FICO score. A charge off signals to a potential lender that you are a bad credit risk. It is true that a bankruptcy filing has an immediate and negative impact on your credit score. However, compared to late payments, high credit usage, collections actions and charge offs, bankruptcy is a lot less harmful than you may believe.
Once you file for bankruptcy, the credit reporting on late payments stops, which in turn stops negative reporting each month after you file. Also, your debts go to zero are designated has having been “discharged in bankruptcy” which lowers your existing balances, over time, your credit score improves instead of declining. Moreover, if you choose to enter into a reaffirmation agreement after your file for chapter 7, your secured lenders will resume reporting your payments to the credit reporting agencies which starts building a new credit history. This is especially helpful when you own a home and are on time with all of your mortgage payments.
It takes time and concerted effort to rebuild credit following a bankruptcy case. While a Chapter 7 filing remains on your credit report for up to 9 years, it is possible to begin repairing credit immediately. If you are in a position to do so, increasing your income is the first thing to focus on. Building credit through secured credit cards and establishing a good payment history is crucial. Rebuilding after filing for bankruptcy is about making timely payments on all car or mortgage loans and new credit cards, and never taking on more than debt than you can afford.
What to Expect When Filing Chapter 7
No one wants to file for bankruptcy. Most people are turned off by the stories they hear from their family, friends, or their own prior bad experiences with inexperienced bankruptcy attorneys. For people who are new to the process, the complexities of the law it’s hard to know where to start. By the time our clients seek out help, they are usually overwhelmed by collection calls and letters, lawsuits, not to mention their day-to-day expenses. The thought of wading through piles of old documents, bills, and payment demands usually brings up anxiety, depression, and even fear. Revisiting the past is a difficult process. Add to that the misconception about what bankruptcy means for your future and the fear of the unknown – it takes courage to take that first step.
Achieving a fresh start is a process that is only worth starting if you intend to follow through to the end of the case and obtain a discharge. It only takes three to five months to complete. During that time, you will be required to gather information and review documents related to your financial affairs. Anyone filing for bankruptcy has to complete a credit counseling course before the case file and a debtor education course after the case is filed. You are also required to attend a meeting of creditors and answer questions under oath to verify the information that you provided to the court. The meetings are held telephonically or by Zoom, so you don’t have to go to court at any time during the process.
Dennery Law helps individuals obtain debt relief under the bankruptcy code. Let’s talk about your debt and how an experienced bankruptcy attorney can help you start fresh. We are available for telephone consultations at no charge to you. In-person or remote appointments are available on weekdays, evenings, and weekends in Lexington and Northern Kentucky.