Chapter 7 Bankruptcy

Chapter 7 bankruptcy is often called a liquidation.  The debtor(s) pay for the items they can afford to keep and return items they cannot afford to keep.  Upon receiving a discharge, the debtor cannot be sued to collect a discharged debt.  In order to be eligible to file a chapter 7 bankruptcy petition, a debtor may not have filed a previous chapter 7 bankruptcy petition that resulted in a discharge of one's debt within the previous 8 years.   A chapter 7 bankruptcy may be reported on a debtor's credit report for up to 10 years.

*  Prior to filing a bankrutpcy case, a debtor is required to complete a course in credit counseling.  This is typically done via the internet, but may be done via the telephone.  A second course is required before the discharge is entered.

*  REAFFIRMED DEBTS:  During a chapter 7 bankruptcy case, a debtor is often asked whether they would like to  keep a car or home.  Usually, a debtor is required to sign a reaffirmation agreement (which the court must approve).  Any debt reaffirmed is legally binding.  Meaning, if a debtor is unable to repay a reaffirmed debt, the debtor may be sued, and his or her wages garnished to repay the debt.

*  Any garnishments of a person's wages/employment income withheld from the debtor's wages within 90 days of filing a bankruptcy petition pursuant to chapter 7 may be returned to the debtor.  

*  EXEMPTIONS-Pursuant  to the laws of the State of Alabama, each perosn may be entitled to keep the following property upon filing a bankrutpcy petition:  interest in a homestead up to $15,000 in value, personal property up to $7,500 in value, burial plots or any pew or seat in any church for a debtor or his family, the federal earned income tax credit, 75% of wages or 30 times the federal minimum wage, and any retirement assets.  Married couples double the exemption amounts so that a married couple may exempt a total of $30,000 in their homestead. 

*  A chapter 7 bankrutpcy case is typically a 90 day process.  Once the case if filed, a creditor's meeting is held in about a month, and the discharge is entered about two months later.

* If your license has been suspended due to your having a wreck during a time that you did not have adequate car insurance, then your license may be reinstated upon your receiving a discharge during a chapter 7 bankruptcy.  Debts arising from an automobile accident when you are intoxicated are typically not dischargeable.

* Certain taxes are dischargeable in a chapter 7 bankruptcy.  Sometimes, a chapter 7 bankruptcy is a better option than filing an Offer in Compromise with the Internal Revenue Service. 

The information contained herein is not intended to be legal advice.  Please call (256) 539-2121 for a FREE CONSULTATION to get legal advice from a local Huntsville attorney on your particular situation.  Bankruptcy is a serious and complicated legal process.  Hire a local attorney you can trust.