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CHAPTER 7 LIQUIDATION

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Chapter 7 of the Bankruptcy Code is called a Liquidation Bankruptcy. Chapter 7 offers debtors the opportunity to discharge, or wipe out, their unsecured debts, such as credit cards, medical bills, repossession deficiencies, unsecured loans, etc.
CHAPTER 7: LIQUIDATION
Chapter 7 of the Bankruptcy Code is called a Liquidation Bankruptcy. Chapter 7 offers debtors
the opportunity to discharge, or wipe out, their unsecured debts, such as credit cards, medical
bills, repossession deficiencies, unsecured loans, etc. without having to make any payments out
to the creditors. The case generally lasts 4 months from beginning to end. At the conclusion of
the case, you receive an Order of Discharge officially zeroing out those debts. There are certain
types of debts that are not dischargeable in a Chapter 7, such as recent IRS tax debt, alimony,
child support, student loans, etc. A discharge is only available to individuals and families. It is
not available to businesses.
In order to qualify to file Chapter 7, you must earn less than a certain amount of money. The
amounts change from time to time and depend on the size of your household. If you are over
that amount, a means test can be completed to see if you still may qualify to file Chapter 7 based
upon your debts and your living expenses. In order to determine your income, the Court will
look back at the last 6 months of income prior to filing the case. To determine if you qualify,
please contact me so we can schedule a free consultation.
In order to file Chapter 7, you must complete a credit counseling session prior to the start of the
case. After filing, you must complete a financial management course. Both of these courses are
available online and over the phone. Approximately 30 days after filing the petition with the
Court, you must attend a Meeting of Creditors, where your creditors are invited to come to the
courthouse along with yourself and your attorney and meet with the Chapter 7 Trustee. Even
though creditors are invited to attend this meeting, they rarely do. A typical meeting usually has
only the person filing, their attorney and the Chapter 7 trustee. The trustee is assigned by the
Court to administer the case and will ask the person filing certain questions about their
paperwork. The meeting generally lasts from 5 to 10 minutes. Sixty days after the Meeting of
Creditors is the deadline for a creditor or the trustee to file an objection to the discharge of your
debts. These objections do not occur very often. After the 60 days expires, the judge will then
sign the order of discharge officially wiping out those debts.
There are two ways that you can protect your property in a Chapter 7: Texas Exemptions and
Federal Exemptions. You can choose the exemption that best protects your property. If you
moved from another state within the past 2 years, you may need to use the exemptions of the
state from where you moved. Any property that is left non-exempt, or unprotected, is subject to
the trustee seizing that property, selling or liquidating it, and using that money to pay off some
of your debt. This is why Chapter 7 is called a liquidation type of bankruptcy. Don’t stress,
though. In 95 percent of the Chapter 7 cases filed, the Debtors do not have any non-exempt
property, meaning that they can keep everything. We will analyze your property and exemptions
when you come in for the free consultation.
A Chapter 7 will stay on your credit report for a period of 10 years. This does not mean,
however, that you will never qualify for a car loan or even a house loan during that time. As
long as you have sufficient income, you should qualify for a car loan within about 12 months
after discharge and a house within 24 months. There are no exact time frames, but generally
speaking, these two periods of time are accurate. Within just a few weeks of your discharge, you
will receive several offers for new credit cards.
If you would like to see if you qualify to file bankruptcy and to learn more about the process,
please contact me at 281-847-4345 or email me at [email protected] to schedule a free
consultation.
Kemsley Law Firm, PLLC
http://kemsleylaw.com/
505 N. Sam Houston Parkway E., Suite 400
Houston, Texas 77060
281-847-4345
Author
Rod Kemsley
Rod Kemsley1   document Email
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