This type of bankruptcy is available to both individuals and companies looking to eliminate, rather than restructure, debt. Individuals at or below the median family income for the area where they live, debts such as credit cards, personal loans, medical bills, and other debts are simply eliminated. While the concept behind a chapter 7 case is that the personal property can be liquidated by the court to pay some of the debt, most people are able to protect all of their property from this liquidation. Only individuals with large amounts of equity in real estate, expensive cars which are paid off, a large legal claim against another which will result in tens of thousands of dollars, or other high-value assets face the liquidation of property. Therefore, most people looking at filing a chapter 7 will be able to keep all of their property, eliminate debt, and be free of the eliminated creditors forever.
As many people have property they are still making payments on when they file chapter 7, such as a car or house, they can enter into an agreement with the creditor to keep the car or house and continue making the same payment they were before the chapter 7 case was filed. Requirements are that the payments are current when the case is filed, otherwise a restructuring of the debt under a chapter 13 may be a better option.
Median income figures for determining whether an individual qualifies for a chapter 7 are based on the pre-tax household income of that individual, whether or not their spouse is filing with them. However, social security income is not counted toward median income figures. These figures fluctuate every few months, but are generally in the following range:
Members of Household Median Income
1 $39.000 to $42,000
2 $50,000 to $52,000
3 $55,000 to $57,000
4 $65,000 to $68,000
5 $74,000 to $76,000
6 $81,000 to $84,000
Notwithstanding these ranges, some people with slightly higher income can still qualify for chapter 7 if they have vehicle debts, daycare expenses, large deductions from their paychecks, or other out of the ordinary expenses.
Chapter 7 cases typically last for 120 days from the date the case was filed. While the case is pending, the person or couple who are filing should maintain monthly payments on mortgages and cars they wish to keep, but no other payments are made to the creditors being eliminated. Chapter 7 offers protection from any contact by or attempts to collect debt on behalf of all creditors from the date a case is filed, including wage garnishments, bank levies, or pending lawsuits.
Companies are able to file chapter 7 as well as a means of liquidating assets. While this does mean that the business will not longer be able to operate, it can be an effective way for a small business owner who no longer wishes to operate a business to stop harassment by creditors and have the assets liquidated by a third party to pay some or all of the companies debt.
Our firm provides competitive rates and payment plans for all chapter 7 cases, and rates vary depending on the complexity of the case and where it is to be filed. We have always been very flexible with payments, and are generally among the least expensive firms for fees while still maintaining the personal attention every case should be given.