Everything You Should Know About Chapter 7 Bankruptcy
Chapter 7 bankruptcy also is known as liquidation bankruptcy, because you'll be selling off some of your assets to pay your debts. You also must qualify based on your income to file for bankruptcy Chapter 7.
When you're under an overwhelming burden of debt, you'll also face additional expenses and time-consuming activities to file for bankruptcy under Chapter 7. DoNotPay can reduce both those burdens by saving costly lawyer fees while taking on the paperwork challenge of a Chapter 7 bankruptcy filing.
What Is Bankruptcy?
First, filing for bankruptcy is not a magic wand. You can't just file for bankruptcy and make all of your debts disappear overnight. Under bankruptcy, you'll be stepping into a process designed to pay off much of your debt. Unsecured debts, such as medical bills and credit-card debt, can be reduced or discharged during bankruptcy.
Among debts that cannot be eliminated during bankruptcy are:
- Tax debts or government fees
- Auto loans
- Student loans
- Child support or alimony
Bankruptcy Code for Personal Debt
Bankruptcy filing for personal debt falls into two categories, which are named after the chapters where they are listed in the federal bankruptcy filing regulations:
|Chapter 7 Bankruptcy||Chapter 7 bankruptcy caters toward lower-income persons who would not have the means to pay off their entire debt with their disposable income.
Unsecured debts generally are waived when the bankruptcy filing is approved, and a trustee will be responsible for selling your personal property to pay off secured debts, such as a vehicle. The process normally takes three to five months.
|Chapter 13 Bankruptcy||Chapter 13 bankruptcy creates a structure whereby higher-income persons can pay off their secured debts and make payments on their unsecured debts over a period of three to five years. At the end of that period, their remaining unsecured debts may be waived.|
Will I Lose My Property When Filing for Bankruptcy?
Though there are exemptions through state regulations and some federal cases, Chapter 7 bankruptcy does require you to sell personal property to pay off your secured debts. This can vary from your automobile to jewelry to computers, whatever has value to cover your debts. It can also include retirement accounts and such.
Typically, homeowners will choose to file for Chapter 13 bankruptcy to protect their homes.
What Happens to My Credit if I Declare Bankruptcy?
If you are to the point where you are considering filing bankruptcy, your credit is likely to be in pretty bad shape anyway. Late payments and accumulated debt make up a large part of your credit score, so you already have done a great deal of damage to your credit.
Bankruptcy will further lower your credit, but it offers the opportunity to turn things around and head in the right direction. A Chapter 7 bankruptcy filing will remain on your credit report for up to 10 years.
Filing for bankruptcy will make it difficult for you to apply for loans, such as for a vehicle or mortgage, which can be a downside to filing for bankruptcy, but it will force you to better manage your purchases.
How Long Does It Take To File for Chapter 7 Bankruptcy?
Chapter 7 bankruptcy cases normally take about four to six months from the time of your filing. How long it will take you to get your records together for the initial filing will depend upon how many of your records you have handy and how much you will need to acquire documents. (You'll see more about the documents needed in the next section.
When you file for Chapter 7, the court will notify your creditors that debt collection must stop and will schedule a 341 meeting of creditors. This normally takes place in 20 to 40 days. After that hearing, creditors will have 30 days to object to any discharge of your debt or your bankruptcy filing entirely.
Your bankruptcy case normally will discharge about 60 days after your 341 meetings, if there are no hitches along the way. You could have a short delay if you fail to provide all the information upfront. If one or more creditors objects to your bankruptcy, that could lead to a bankruptcy lawsuit that would delay your case for a matter of months.
You also will be required to take a credit counseling course before filing for bankruptcy, but that can be done online in a few hours. Then, you'll need to take a financial management course, which can be done while you are awaiting the 341 meetings and the time after.
What Documents Do I Need to File for Chapter 7 Bankruptcy?
Along with your bankruptcy application, you'll need to file documents of your income, your debts, and your monthly expenses.
To qualify for Chapter 7 bankruptcy, your income must be below the median income for your state or it must meet a means test, which determines if you can reasonably be expected to pay your debt with your disposable income, which is the income after your monthly expenses are paid.
To determine income, you'll need two years of your tax filings plus current proof of income, such as recent pay stubs.
For expenses, you'll need to show a lease if you're paying monthly rent, utility bills, food costs, and any other monthly payments, such as child support or alimony.
As for debts, you'll need to provide collection letters, credit card bills, medical bills, vehicle loan records, etc. You can show your credit report that includes all of your debts, but the court requires addresses for creditors, which are not included in a credit report.
How to File for Chapter 7 Bankruptcy on Your Own
The court allows you to file for Chapter 7 bankruptcy on your own, referred to as "per se." These are the steps you would need to follow:
- Obtain the bankruptcy filing forms from your local court. This could include 20-plus forms, depending upon your case.
- Gather the paperwork regarding your income, expenses, and debts.
- Compile a list of your personal property and determine if any should be exempt from being sold.
- Fill out all the paperwork that applies to your case.
- File your case with the filing fee or the application to have the fee waived or made in payments.
- Be prepared to answer questions from the trustee assigned to your case and provide any missing information.
If you are missing information or incorrectly reporting any information, your case will be delayed while the records are corrected. If you purposely misstate information, your filing could be rejected, and you could be charged with fraud or contempt for the false filing.
If your case is more complicated and you own more property, you might need to consider hiring an attorney, which could cost you hundreds or thousands of dollars.
Save Time and Money by Filing for Chapter 7 Bankruptcy With DoNotPay
DoNotPay works with individuals, not companies, to determine which kind of bankruptcy best suits your case and to walk you through organizing your debts and assets, so you'll be ready to fill out your forms with ease. DoNotPay also will ensure your paperwork is accurate and complete to avoid delays in your case.
How to File for Bankruptcy Using DoNotPay:
If you determine it's in your best financial interest to file Chapter 7 bankruptcy, DoNotPay has you covered in 5 easy steps:
- Search for File for Bankruptcy on DoNotPay.
- Put together a list of your debts, expenses, and assets. If you need help accessing information like your credit report, DoNotPay can help you get your report.
- Let DoNotPay walk you through your bankruptcy options and help you determine whether a Chapter 7, Chapter 12, or Chapter 13 bankruptcy is right for you.
- DoNotPay will then help find the best credit counseling course near you, which you need to complete before filing your bankruptcy forms.
- Lastly, DoNotPay will gather all of the forms you need (including available fee waivers) and help you locate your nearest bankruptcy court. All you have to do is complete the required forms, prepare your filing fee, and file the application with your local court.
And that's it! Once done, the court will give you:
- Your bankruptcy case number
- The name of your bankruptcy trustee
- The date, time, and location of your meeting with your trustee
At this point, your case has been filed. Congrats! The automatic stay now protects you from all debt collectors. Your trustee will then contact you for further financial documents you will need to provide. Make sure to attend your meeting as well as complete the post-filing bankruptcy debtors course.
Why Use DoNotPay to File for Chapter 7 Bankruptcy
DoNotPay will make sure your Chapter 7 bankruptcy filing will be accurate and save you the anxiety of going it alone. These are the three reasons it's best to file through DoNotPay:
- Fast—You don't have to spend hours trying to file for Chapter 7 Bankruptcy.
- Easy—You don't have to struggle to fill out tedious forms or keep track of all the steps involved filing.
- Successful—You can rest assured knowing we'll make the best case for you when it comes to filing.
What Else Can DoNotPay Do?
Helping you file for Chapter 7 bankruptcy is just one of many problems DoNotPay can help you with. If you have other legal or sticky issues, these are just some of the services DoNotPay offers to ease your burdens:
- Debt verification letter
- 609 letter
- Breach of contract
- How to cancel
- Chargebacks and refunds
- Power of attorney
- Missing money
- Inflation pay request
If you feel the way out of your financial situation is to file for Chapter 7 bankruptcy, sign up for DoNotPay today and get started pulling all of your paperwork together to put the mess behind you.