If you’re drowning financially, then Chapter 7 bankruptcy might be right for you. We’ve prepared this FAQ to help you make an informed decision about how to proceed.
How does a Chapter 7 bankruptcy show up on my credit report?
Bankruptcy only discharges your legal obligation to pay the debt but it will not make those debts disappear from your credit report. Instead, they will continue to appear with a notation that they were discharged in a Bankruptcy until they fall off of the credit report in 7 years. In addition, your credit report will continue to show that you filed a Chapter 7 bankruptcy for the next 10 years.
Would a debt management company be a better choice?
Most often debt management is not the better choice. What debt management companies fail to tell you is that the process lowers your credit score making it more difficult to rebuild your credit than filing for bankruptcy does. They also charge you fees, and often those fees can add up to an amount of $200 to $500, which in many cases is enough to at least pay off a single bill. You’ll spend more money and time attempting to repay your loans and rebuild your credit than you would obtaining a fresh start through a Chapter 7 bankruptcy.
Does a Chapter 7 Bankruptcy cover all debts?
Unfortunately, not all debts are dischargeable in a Chapter 7 bankruptcy. This includes alimony, child support, some taxes, student loans, and any fraudulent debts. Additionally, you cannot discharge debts for fines and penalties, or for debts incurred for injuries caused by another if you were driving while intoxicated. You also can’t receive a discharge for debts that were incurred while causing deliberate, malicious injury to the person or property of another.
How do I know Chapter 7 is right for me?
Filing for Chapter 7 bankruptcy is typically more advantageous to individuals with fewer assets. However, if you have enough disposable income to pay your debts then a reorganization of your budget is advisable as Chapter 7 cases do get dismissed if the Trustee determines that you do have the means to pay your debts.
What can make me ineligible for a Chapter 7 bankruptcy in Brooklyn NY?
You are not eligible if you:
- Don’t qualify under the Means Test.
- Have intentionally dismissed a Chapter 7 case within the past 180 days.
- Have received a Chapter 7 discharge within the past 8 years.
- Have received a Chapter 13 discharge within the last 6 years.
- Have enough disposable income to service your debt, as defined by the amount of money you have left after paying your living expenses and the living expenses of any dependents.
Can I rent an apartment or buy a house after filing for Chapter 7 bankruptcy?
The filing of the bankruptcy will show up on your credit report for up to 7 years, so it is important to understand it may have an adverse effect on your ability to rent an apartment or buy a house. Many landlords will still allow you to rent if there has been some time since your filing and you have been rebuilding your credit by paying new accounts in a timely fashion.
As for buying a house, many lending institutions will allow persons with a bankruptcy on their credit to receive a loan for a house once the filing and discharge are over two years old and your you’ve rebuilt your credit to a solid score.
What is a bankruptcy Trustee?
Your trustee is an officer of the court, an attorney, who is responsible for examining your financial affairs. For example, he or she may look back at asset transfers made up to 10 years ago to determine whether or not these transfers were made with an intent to defraud creditors. The Trustee can also send an appraiser to your home to determine whether or not you have undervalued your possessions. Finally, the Bankruptcy Trustee does have the power to dismiss your case.
What is the 341 Meeting of the Creditors?
The 341 Hearing is the deposition of your case by the Trustee where creditors are able to come and dispute the dischargeability of your debt. You will be asked questions about your financial affairs and what lead you to file for bankruptcy. More often than not, creditors do not attend these meetings, but depending on the debt being discharged, some creditors may take more interest in the proceedings than others.
What does the Chapter 7 process look like?
First, your attorney will file a Bankruptcy Petition on your behalf. You will have to provide your attorney with a great deal of financial information so that it may be included in your petition, so it may be helpful to gather all of this information before you call. You’ll want to include any information you have about your financial history, including bank statements, deeds for your assets and property, debts, the names and addresses of your creditors, information about income sources, and anything else that you can think of if it has to do with the money flowing into and out of your life on a regular basis.
Once the petition is filed you will receive an “Automatic Stay.” This Automatic Stay brings all collection action to a temporary halt, which means all phone calls, letters, garnishments, lawsuits, or repossessions come to an immediate halt. This gives you some breathing room to pursue your case. Of course, the Automatic Stay goes away if your Bankruptcy case is dismissed, and is no longer necessary if your debts are ultimately discharged. Some creditors are a bit slow to get the memo, so just refer them to your attorney if you happen to get a call after you file.
The court then appoints the Bankruptcy Trustee. Again, it is important to provide the Trustee with any information that he or she may ask for.
You will be assigned a date for the 341 Meeting of the Creditors within 30 days from the date of filing. This is where you will have You’ll meet with the Trustee at this meeting, as well as any creditors who might want to challenge your bankruptcy case. It’s quite rare for creditors to choose to show up, but they do have the right to do so. You should at least remain prepared for the possibility.
If the Trustee approves your case then your assets will be sold, and the creditors will receive the proceeds. If any of the proceeds are exempt, that amount will go to you. Barring any complications you should receive your discharge within 5-6 weeks (70) days).
What are the long-term impacts of Chapter 7 Bankruptcy?
As bankruptcy attorneys we hear a lot of fears about Chapter 7 bankruptcy. Many of our clients are afraid they’ll never be able to apply for an apartment, get utilities in their own name, or take out a car loan ever again.
In truth, bankruptcy often makes your credit score better in the short-term, since you’re wiping out a bunch of obligations that you didn’t have before. You may have to pay bigger deposits on certain items, but you’ll be able to live a normal life. You’ll even be able to rebuild your credit. People take out credit cards, car loans, and home loans after bankruptcy all the time.
The key is to make sure that you resolve whatever issues brought you to the bankruptcy in the first place. If it was a one-time event like a divorce, a major medical issue, or some other misfortune then you can simply sit back and enjoy your fresh start. If you dealt with persistent destructive financial patterns then take the financial counseling that you will receive during your bankruptcy (fulfilling a requirement of the law) to heart. If you do, you’ll enjoy a much brighter financial future after taking advantage of this important legal remedy.