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.

© 2015 by Cynthia Rena Wright, P.C.  Proudly created with, "No representation is made that the quality of legal services to be performed is greater than the quality of legal services performed by other lawyers." "This is a debt relief agency. We help people file for relief under the Bankruptcy Code."


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