Chapter 7 Bankruptcy: A Bird’s Eye View
Chapter 7 bankruptcy gives you a “second chance” to get your finances under control by having a bankruptcy court legally discharge (or wiped out in friendly lingo) most of your unsecured debt, such as credit card debt, hospital bills, as well as personal loans. Rarely does it get rid of alimony, child support, student loans, or tax debt.
“Liquidation bankruptcy” describes this type of bankruptcy. It is the most common, easiest, and quickest way to file for bankruptcy. According to the American Bankruptcy Institute (ABI), while bankruptcy filings nationwide were down 24% (to 397,370) in 2021, the ratio of Chapter 7 filings to all bankruptcies remained stable at 69%.
Is Chapter 7 Right For Me?
Some of the differences can be traced back to this: not everyone can file for Chapter 7 bankruptcy. The court uses a “means test” to decide if a Chapter 7 filing is eligible. The bankruptcy means test looks at your income, expenses, secured and unsecured debt, and other financial records to see whether your disposable earnings are below the median income for your state (50 percent lower or 50 percent higher). The income level for the means test differs from state to state.
Applicants are occasionally asked to sell any non-exempt assets, however, according to several online sources, 96% of Chapter 7 petitions are “no asset” filings, meaning there is insufficient equity or worth in the properties for the trustee to liquidate them and pay off lenders. One of the good things to think about is this: most of the time, it takes between four to six months to finish the Chapter 7 process.
Oregon (Portland, Salem, Medford) Bankruptcy Lawyers
If you have too much debt to handle and don’t know what to do, our Oregon and Washington bankruptcy lawyers at Northwest Debt Relief Law Firm can help you. We believe that everybody deserves a fresh chance at a good life, and we’ll find the best way to help you get your finances back on the right track!
Our Oregon (Portland, Salem, Medford) bankruptcy lawyers will give time to answer all of your questions so you will gain peace of mind. We can help take away the pressure and burden of your debt problems today. Call us now for an appointment!
How Does Bankruptcy Under Chapter 7 Work?
If you file for Chapter 7 bankruptcy and are approved, you can get rid of a lot of unsecured debts. But other debts, by law, will stick to you like glue. For the rest, there are gray areas that require case-by-case consideration.
The following debts in Oregon are dischargeable under Chapter 7:
- Balances on credit cards (includes overdue as well as late fees)
- Accounts in the hand of a collection agency
- Medical bills
- Payday and personal loans (unsecured)
- Mortgage or auto loans that you can’t pay back (but the house or vehicle can be reclaimed)
- Home owners association fees (if you give back your home or your condo)
- Utility bills
- Civil court rulings (not fraud based)
- Overpayments from Social Security
- Veterans’ loans and overpayments
Debts in Oregon that are not dischargeable under Chapter 7 include:
- Child Support
- Student loans (Student loans can only be canceled if you can show that paying them is too hard)
- Home owners association fees (if you keep your home or your condo)
- Personal injury debts caused by something you did while you were drunk
- Unsecured debts that you intentionally did not include in your filing
- Secured debts
- Tax liens (Income tax debt that has been around for at least 240 days and meets other restrictions)
To start the Chapter 7 process, you have to file a number of documents and pay a number of fees, unless you are in a very difficult situation.
If you’re serious about handling Chapter 7, here’s a quick primer:
- Start by filling out a long list of forms that list the debtor’s assets, expenses, income, liabilities, overall financial position, and also any existing contracts or leases that are already in their name.
- Chapter 7 debtors must then pay $20 to $100 for credit counseling before they file for bankruptcy. Nonprofit credit counseling agencies usually offer these courses. They look at your finances to see if there are other ways to solve the problem (like debt consolidation, debt management, debt settlement, or nonprofit debt settlement) that don’t involve filing for bankruptcy to resolve the issue.
- If bankruptcy is your best option, you must take the forms you filled out in Step 1 to the local bankruptcy court and file a bankruptcy petition.
- From there, you’ll need to start to pay for the process with what’s left in your wallet. Yes, bankruptcy has its own costs. There is a fee for filing the petition ($335), court fees (which differ state-to-state), and, unless you are still representing yourself, attorney fees (which, according to the National Bankruptcy Forum, average $1,250 and are paid upfront).
- When someone declares bankruptcy, they have to fill out a lot of paperwork, which is then made public. People who go to bankruptcy court are often listed in newspapers and on the Internet, so they potentially may lose financial control and privacy.
Property Exemptions Under Chapter 7
It was already mentioned earlier that Chapter 7 is often called “liquidation bankruptcy,” which means that the debtor can sell everything they own in one big garage sale to help pay off their debts.
Extreme liquidation, on the other hand, doesn’t happen very often.
The bankruptcy process can be hard, but the point of bankruptcy law is to help people get out of overwhelming debt and start over. Taking everything away from Chapter 7 petitioners would not help them get back on their feet and ready to contribute financially to their communities.
In light of this, most “necessities of modern life,” or things that are needed for living and working, are not taken away by bankruptcy law.
“This doesn’t mean you have to keep everything you own. Rather, exemption laws in bankruptcy protect things that people need, like a car that works, furniture, and clothes. Whenever a bankruptcy exemption does not cover all of your property, it is “nonexempt.”
Exempted Properties Include:
- Motorized vehicles (until a certain value).
- fairly essential Clothing.
- Things and furniture for the house that is reasonably necessary.
- Home appliances.
- Jewelry (until a certain value).
- A portion of the debtor’s home equity.
- Tools of the trade or job of the debtor (until a certain value).
- A portion of wages earned but not yet paid.
- Benefits from the government, like Social Security, welfare, and unemployment compensation accumulated in a bank account.
- Payouts for personal injuries.
When Does My Chapter 7 Bankruptcy Case End?
It’s not uncommon to be unsure when your bankruptcy will end. Many people think it’s over after the meeting with creditors, which everyone who files for Chapter 7 or Chapter 13 must attend. Some people think it’s over when they get the discharge, which is the court order that wipes out their debts if they qualify.
But neither of them is right. These are what you need to know:
- Your debt is wiped out by a “discharge.” A “discharge order” is the official court form that clears out your debt, and a “final decree” is the official court form that ends your case.
- In Chapter 7 bankruptcy, the court often closes your case with a final decree soon after mailing out the discharge order.
- You have to work with the bankruptcy trustee in charge of your bankruptcy case until it’s closed.
- A case that has been closed can be reopened by the court to fix problems or fix mistakes.
If you do everything right, all of the above will happen. If you do something wrong or forget to do a step, the court can “dismiss” or close your case without giving you a discharge. You will find below a more thorough explanation.
Your Bankruptcy Case Is Closed When The Final Decree (Not The Discharge) Is Issued
You will get your discharge before the case is over except if you make a mistake, like neglecting to file your debtor education certificate. A discharge is an order from the bankruptcy court that says certain debts, such as credit card debts, medical bills, utility bills, and more, are no longer due.
But the discharge order does not mean that the case is closed. Your bankruptcy case will stay open until other aspects are finished, which may be in a few days, a few months, or even a year. Here’s what happens in Chapter 7.
- Most Chapter 7 filers get their debts forgiven about 60 days after the 341 meeting as long as there are no assets or litigation involved. If you did not lose any property in the bankruptcy and the court does not have to deal with a motion or a lawsuit, it will close your case a few days later with a “final decree.”
- If someone objects to your discharge in a Chapter 7 case that involves assets or a lawsuit, it could take longer to have your discharge. Even if you get the discharge to be released within a few months, the case won’t be closed until the bankruptcy trustee sells property and pays creditors, and until the court settles any lawsuits. When the court is ready to close the case, you will receive the final decree.
After you get a bankruptcy discharge, you still have to take care of things
After the court gives you a discharge, complicated bankruptcy cases that involve big property sales or existing lawsuits termed “adversary proceedings” stay open for a long time. The court will not close your case until the bankruptcy trustee has taken care of all the property in the bankruptcy estate and filed a final accounting.
Here’s the catch: you have to work willingly with the trustee until the court closes your case. Among the things you may have to do are:
- surrendering property that a bankruptcy exemption couldn’t protect
- responding to discover or showing up at a 2004 examination (a type of investigation), or
- testifying or defending yourself in a motion hearing or an adversary proceeding
When Your Bankruptcy Case Will Be Closed By The Court
Chapter 7 cases involving assets that are hard-to-sell, like real estate, or cases that involve fraud litigation tend to stay open for a long time.
Chapter 7 cases that don’t have any of these problems usually end in four months.
Reopening Your Closed Bankruptcy Case After It Has Already Been Closed
The court can be asked to reopen your bankruptcy case by you, the trustee, or your creditors. However, why would anyone want to open it back up again?
You may want to reopen it if you mistakenly neglected to include a debt in your list or when a creditor is breaking the terms of your discharge. In these situations, you could request the court to look at your case again and deal with these issues.
Or, let’s say that someone thinks that you lied on your bankruptcy papers or didn’t list all of your assets. The court could look at your claim again and, if needed, tell the trustee how to handle those assets. Even worse, the court could take away your discharge.
Bankruptcy Lawyer In Oregon (Portland, Salem, Medford)
Bankruptcy law is unique in that it is largely a process of qualifying. The laws tell you how to fill out 50-60-pages of a bankruptcy petition, and you cannot skip a step because all rules apply in each and every case.
The steps to filing bankruptcy are long and complicated. You may be unsure of which among your assets are safe to retain, how to fill out the documents, or even how to begin the process. Only with the right bankruptcy lawyer can this stress and confusion be taken away, making a hard process easier to handle.
The Northwest Debt Relief Law Firm is a special kind of bankruptcy law firm. If you need help getting a fresh financial start, our Portland bankruptcy lawyers are available to guide you through the entire bankruptcy process. For us, bankruptcy is only the first step in helping you get out of debt completely. Every client gets a full set of services, which includes:
- a one-time free consultation with an experienced bankruptcy lawyer, not a paralegal, without you having to come to our office
- Personalized legal fees based on how hard your case is. There is no “one size fits all” solution to your debt problems.
- Payment plans can be changed to fit your needs.
- Stop creditor harassment immediately by contacting debt collectors within 48 hours to inform them that they are not allowed to contact you about your debts and that any communications must be done through our office.
- You can make unlimited emails and phone calls to get your questions answered.
- You have 100% secure online access to your case information so you can get useful information 24/7. We’re the 1st law firm that can do so much for you without you having to leave your chair.
- You will get full legal representation in court, never having to go it alone.
- After your bankruptcy case is over, you can get free updates to your credit report.
- Lifetime support for any questions or problems that come up with your case, FOR FREE.
So, if you or a loved one are in need of the most comprehensive debt relief solutions around in Oregon, simply pick up the phone and give us a call at any time, 7 days a week.