How Chapter 7 Bankruptcy Works
Chapter 7 bankruptcy is also known as “full” bankruptcy. This form of bankruptcy is designed for people who make less than a certain income based on their household size. You may have heard of this analysis. It is called a “means” test.
You can have assets up to a certain value and still file a Chapter 7 bankruptcy without risking liquidation by the bankruptcy trustee. The Chapter 7 trustee’s job is to assess whether you have assets that can be sold to pay back some of your debts. Many cases do not. An experienced bankruptcy attorney can advise you and maximize how much you get to keep in your Chapter 7 bankruptcy case.
If you do have unexempt assets, the Trustee can sell them to pay off your creditors. The money from the sale of these items is distributed to your creditors and any remaining debt is “discharged” or eliminated. The Chapter 7 bankruptcy process typically takes about four months to complete.
Determining Whether You Qualify For Chapter 7 Bankruptcy
To qualify for Chapter 7 bankruptcy, you must first take a “means” test. If your average monthly income for the six-months prior to applying is lower than the median income of a household the same size in Ohio, you pass the means test. When your income is above Ohio’s median income, you must complete the entire means test. If you fail the means test, you may still qualify for Chapter 13 bankruptcy.
Types Of Debt That Can Be Discharged Through Chapter 7
Chapter 7 is designed to free you of unsecured debt. This means things like credit card debt, medical bills and personal loans. People going through Chapter 7 are usually able to keep their home and their vehicle, but not in all cases. The three most common types of non-dischargeable debt are:
- Child support
- Tax debt
- Student loans
- Debt incurred through fraud
- Criminal penalties
The court may also declare a debt nondischargeable due to creditor objection.
To Get A Fresh Start Through Chapter 7, Contact Athena Legal, LLC
We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.