Chapter 7 Bankruptcy

Experienced Buffalo Bankruptcy Attorney Explains The Chapter 7 Bankruptcy Process

Are you drowning in debt? Are you struggling to pay your mortgage, credit card bills or car payment? Are you being harassed by creditors and debt collectors? If so, you may benefit from filing for Chapter 7 bankruptcy.

Chapter 7 bankruptcy is one of the more beneficial options available in that it allows debtors to wipe clean many of their debts. This potential for getting a “fresh start” appeals to many debtors, but they will have to meet certain eligibility requirements before they can go this route.

However, in some cases, even if a debtor is eligible for Chapter 7, it may not be the smartest decision. If you’re in the Buffalo area, the award winning Buffalo bankruptcy lawyers at Cole, Sorrentino, Hurley, Hewner & Gambino, P.C., can provide you with the guidance and help you need to choose and file the most beneficial form of bankruptcy possible for your situation.

At Cole, Sorrentino, Hurley, Hewner & Gambino, P.C., our lawyers have extensive experience helping clients find debt relief through Chapter 7 bankruptcy. Our primary goal is always to provide our clients with a fresh start, allowing them to move beyond their financial burdens and take back control of their life. Contact our offices in Buffalo, Hamburg, Batavia or Niagara Falls, New York, to schedule a consultation.

Do You Qualify for Chapter 7 Bankruptcy?

The first step in the bankruptcy process is to take a means test, which determines your level of debt and the type of bankruptcy for which you qualify. If you have limited income and have a high amount of unsecured debt, you will more than likely qualify for Chapter 7 bankruptcy. If you have a steady income, but are struggling to make ends meet, Chapter 13 bankruptcy may be a better option.

If you qualify for Chapter 7 bankruptcy, much of your unsecured debt will be discharged, excluding any tax liability or student loans. We will carefully explain the specifics and answer all of your questions during a detailed consultation. Rest assured, you will fully understand what to expect from Chapter 7 bankruptcy.

Can You Keep Your Property?

One of the more common fears our clients have about Chapter 7 bankruptcy is losing their belongings. While it is true that some of your belongings may be subject to liquidation, there are numerous items that are exempt under the law. These include:

  • Insurance policies
  • Pensions and retirement plans
  • Clothing, furniture and other household goods
  • Cash up to a certain amount
  • Primary residence if you have under $50,000 equity invested in it
  • Car if you have limited equity in it

The Chapter 7 Bankruptcy Process

The Chapter 7 bankruptcy process is not available to any debtor who seeks it. Debtors who have already used Chapter 7 cannot use it again for eight years. And debtors who have already filed for Chapter 13 bankruptcy cannot use Chapter 7 until six years have passed (although there is an exception for this).

Most importantly, debtors are subject to a “means test” which makes sure the debtor isn’t making too much money to take advantage of Chapter 7’s ability to wipe away their debt. Until this means test was created, many debtors abused Chapter 7 by piling up a lot of debt, and despite making a relatively large income, were able to wipe away much of that debt.

Once a debtor is determined to be eligible for Chapter 7 bankruptcy, the debtor will have to file the necessary documents and submit the proper fees with the bankruptcy court. The fees usually add up to a few hundred dollars. Some of the more important documents include the bankruptcy petition itself, a list of the debtor’s assets and debts, a list of the debtor’s current income and bills and a summary of the debtor’s financial situation. There are many other documents that may need to be included with the bankruptcy petition, but it will depend on the debtor’s particular situation.

After the petition is filed, the automatic stay is granted, which basically stops all collection activity against the debtor’s property and assets. This means any debt collection phone calls, wage garnishments and collection lawsuits must stop. An estate is also created, which contains all the debtor’s assets that are subject to liquidation and can be used to pay back the creditors.

A bankruptcy trustee is then assigned to the case and a creditors meeting is held. The debtor will have to attend and answer, under oath, questions from the trustee and creditors concerning the debtor’s financial situation and property. It’s during this time that the trustee will decide whether the debtor is trying to abuse the Chapter 7 bankruptcy process.

The trustee will take the assets in the estate, sell them off to get the most money possible, and use the proceeds to pay back the creditors. Whatever debts are not paid after the estate is liquidated will be discharged, or wiped clean, with the debtor no longer liable for those debts. There are some exceptions to this discharge, such as debtor assets that are used as collateral for certain debts or when there are liens. Depending on how complicated the bankruptcy is, most Chapter 7 bankruptcies are completed in a few months.

Why Should I File Chapter 7 Bankruptcy?

The biggest reason you might want to choose Chapter 7 bankruptcy is the ability to discharge your debts (although there are some debts that cannot be discharged under Chapter 7, such as student loans, alimony and child support).

If you’re a business, you might choose to file for Chapter 7 if you intend to go out of business, but want to take care of a few last projects until you do. To do this without worry about annoying creditors, filing for Chapter 7 will provide you with the automatic stay. Once the project is complete, you can wind down your business under the supervision of the bankruptcy trustee.

Why Shouldn’t I File Chapter 7 Bankruptcy?

The ability to discharge most of your debts makes Chapter 7 bankruptcy very desirable. However, in some situations, it’s probably a bad idea for you to file for Chapter 7. For example, if you’re a business that files for Chapter 7 bankruptcy, your business will cease to exist once the bankruptcy process is completed. If you wish to continue your business after declaring bankruptcy, Chapter 7 is not an option for you.

Additionally, a business that goes through Chapter 7 bankruptcy does not technically discharge its debt, although in reality, it’s an effective discharge. Creditors may obtain a judgment to collect outstanding debt against the business, but since it’s no longer in business, the creditors will get nothing for their efforts.

If you want to keep certain assets, that’s another big reason not to file for Chapter 7 bankruptcy. Chapter 7 provides for relatively few exempt assets. So unless a specific New York law allows for a particular exemption, most of your property will be lost in bankruptcy.

Finally, a Chapter 7 bankruptcy will be on your credit history for 10 years (it’s only seven years for Chapter 13 bankruptcy).

Still have questions about Chapter 7 Bankruptcy?

Chapter 7 bankruptcy is known as the liquidation bankruptcy because it completely discharges your debt. You are provided with a fresh financial start. To discuss this bankruptcy option with an experienced attorney, contact Cole, Sorrentino, Hurley, Hewner & Gambino, P.C., in Buffalo, New York, to schedule a consultation. We welcome the opportunity to represent you.

If you’d like to learn more about filing for Chapter 7 bankruptcy, don’t hesitate to contact one of our skilled bankruptcy attorneys at Cole, Sorrentino, Hurley, Hewner, & Gambino, P.C.,. We offer flexible appointment schedules and a free initial consultation.

We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.