How Does Chapter 7 Bankruptcy Work?

Does A Chapter 7 Make Sense For Me?

Whether a Chapter 7 bankruptcy makes sense in your situation is dependent on a variety of factors. Some of the most common indicators that bankruptcy might be for you include:

  • After your expenses and debt payments, you find yourself with little or no money at the end of the month.
  • You find yourself transferring balances from one credit card to another to avoid late fees or penalties.
  • You have been sued by a creditor.
  • You expect to be sued by a creditor.
  • You are being garnished.
  • You fear garnishment may be forthcoming.
  • You forego basic necessities like healthy meals in order to pay down your debt.
  • The amount of debt and/or interest rates appear as if you will never be debt free.
  • You are being denied applications for apartments after a credit report check.
  • The stress of debt is encroaching on you and your family’s ability to enjoy a happy and healthy life

The ultimate goal of your Chapter 7 bankruptcy is to discharge your debts, preventing creditors from collecting against you. The purpose of a bankruptcy is to allow a fresh financial start for a debtor. The most common types of debt a person will discharge in a chapter 7 bankruptcy include credit card debt, personal loans, and medical debt.

Are There Any Exemptions To Liquidation?

A Chapter 7 bankruptcy is commonly referred to as a “liquidation.” However, most all debtors that receive a discharge in bankruptcy also do not lose any of their assets or property because bankruptcy allows “exemptions” for property needed to live your life. For example, in Idaho an individual may exempt up to $7,000 in the equity of a vehicle they own. This means a vehicle valued up to $7,000 without any loans on it is completely protected. Similarly, a vehicle with a $7,000 loan and a value of $14,000 would also be completely protected. Your furniture, household goods, and clothing have exemptions available to protect them as well. Idaho allows an exemption for up to $100,000 in a home you live in. There are also protections available for retirement accounts.

How Does The Process Start?

The bankruptcy process begins the moment you have a no-obligation initial consultation with one of our bankruptcy experts. There, we will review general information about your financial situation to determine your eligibility to file a bankruptcy, and whether or not it makes sense. If bankruptcy is the best option for your unique situation, the next step is to sign a representation agreement and begin the process of gathering information and documentation we need in order to file your petition. Once we receive what has been requested, we draft a petition. You review this petition, and we file it with the Court. The moment we file it with the Court, absent rare exceptions, no one can do anything, in any way whatsoever, to attempt to collect a debt against you. If any garnishments are ongoing at that point, they are halted immediately.

About one month after filing, you attend the 341 meeting of the creditors, during which the chapter 7 Trustee that has been assigned to your case has an opportunity to ask you questions about your financial situation, including the contents of your petition. Your attorney attends and represents you during that meeting. If there are no objections to your discharge, you will receive a discharge approximately sixty days after your meeting with the Trustee.