When the bankruptcy code was changed to make filing for Chapter 7 bankruptcy more difficult in 2005, many people struggling with debt assumed that the benefits provided by Chapter 7 were eliminated as well. While it’s true that both being approved to file bankruptcy as well as the bankruptcy process are more complex, the debt relief benefits of Chapter 7 are as strong as ever. What has changed is that the complexity of the process from beginning to end now requires the assistance of a bankruptcy attorney to ensure the best results.
One layer of complexity added by the bankruptcy code overhaul was the implementation of a “means test” which is now the main determining factor of whether a person will be approved to file a Chapter 7. Generally speaking, the means test sets the dividing line between a Chapter 7 and Chapter 13 filing at the median income level for the state of residence with those above the line being directed toward Chapter 13 while those below it become eligible for Chapter 7. The test also takes the filer’s income, expenses, assets and liabilities into consideration which is a key area where a bankruptcy attorney can add value. This is especially true under at least two circumstances:
* Where the filer is on the borderline in terms of the median income level and a Chapter 7 will provide the best outcome.
* There are situations where filing a Chapter 7 might not be the best venue for a filer. One example would be when a filer has a level of assets and equity that might have to be surrendered to the bankruptcy court under a Chapter 7 bankruptcy. It is possible that even if a filer qualifies for a Chapter 7, a Chapter 13 could provide better results due to a more flexible treatment of assets in a Chapter 13 bankruptcy.
Once a filer is deemed eligible for a Chapter 7 bankruptcy filing and the bankruptcy attorney guiding the case concurs that it will provide the best results for the client, the process gets underway. The process, which takes about four months to complete, yields two huge benefits for the filer:
* The complete discharge of unsecured debts such credit card, medical bills, and signature loans. The discharge removes any obligation for further payments after the individual bankruptcy filing is finalized.
* Filers can retain most, if not all of their assets in a Chapter 7 despite its stated purpose as a liquidation process. However, past due payments on secured balances such as those on the mortgage and vehicles must be brought current shortly after the close of the bankruptcy process or the lenders can restart the process of foreclosure and/or repossession.
While the benefits of Chapter 7 haven’t changed, the process for attaining them has. The simplest way to handle these changes is to go into your bankruptcy filing under the guidance of an experienced bankruptcy attorney. For a free initial consultation on how a Chapter 7 bankruptcy can benefit you, visit http://www.feldmanlawcenter.com/ or call (800) 527 8497.