Chapter 7 Bankruptcy
Chapter 7 bankruptcy, also called liquidation bankruptcy, was designed to give debtors a fresh start. When you file Chapter 7 bankruptcy, most collection efforts are stayed (or stopped) by operation of law. Creditors cannot initiate or continue lawsuits or harass you via phone. Most consumer debts (e.g. medical debt or credit card debt) are discharged in 3-4 months, and the slate is wiped clean. Certain debts will not be discharged, such as alimony, student loans, child support and certain taxes. No two bankruptcy cases are exactly the same, and it is therefore important to get the advice of a trustworthy attorney about whether Chapter 7 bankruptcy is the right long-term solution for you. If you are overwhelmed by unsecured debt, an experienced Montgomery bankruptcy attorney can help you file for Chapter 7 bankruptcy.Who Is Eligible for Chapter 7 Bankruptcy?
Not everyone is eligible for Chapter 7 bankruptcy. An individual must pass a "means test" in order to qualify. The first prong of the means test is to measure your income against the state median for households the same size as yours. If your income is less than the median, you qualify for Chapter 7. If your income is greater, the second prong of the test is to look at your "allowed" monthly expenses to see whether you have enough disposable income to repay unsecured debts. Those who do have enough disposable income to pay back debts will not be eligible for Chapter 7, but will be eligible for Chapter 13 bankruptcy, which requires you to reorganize and repay at least some of your debts.
An Alabama attorney can file a petition with the bankruptcy court that serves your area. The petition will be filed with a statement of financial affairs, a schedule of income and expenditures, a schedule of assets and liabilities, a schedule of contracts and leases that have not yet been performed, and any other documents associated with the debts you owe. Under 11 U.S.C. § 302(a), a husband and wife may file a joint petition or individual petitions.
While some assets can be sold to pay back debts, certain pieces of property can be protected with exemptions. Exempt properties are those assets that cannot be sold off in order to pay a creditor. An attorney will file a schedule of exempt property with the court. Your nonexempt assets will be liquidated so that your unsecured creditors are repaid as much as possible.
Unlike many other states, Alabama is not part of the U.S. Trustee system, which is administered by the Department of Justice. Rather, in Alabama, bankruptcy administrators appoint trustees responsible for the supervision of Chapter 7 bankruptcy proceedings; the Administrative Officer of the United States Courts governs the work of bankruptcy administrators.
Between 21-40 days after a Chapter 7 petition is filed, a trustee will hold a meeting of your creditors. Usually you appear briefly and answer the trustee’s and creditors' questions under oath about your financial status and property. It is rare for creditors to attend. The questions are asked partly to ensure the debtor has reviewed their schedules and the schedules are accurate and complete and for the particular purpose of making sure there has been a full disclosure of the debtor’s assets. When a joint petition is filed, both spouses must attend the creditors' meeting and answer questions. Bankruptcy judges do not attend.
The trustee reports back to the court. If nonexempt property is owned, you may have to turn that property over. If the property isn't worth much or it would be too hard to sell the property for a reasonable return, you may be able to keep abandoned property even though is nonexempt. If handled properly, a Chapter 7 bankruptcy will discharge your debt in about 3-4 months.Retain an Experienced Alabama Bankruptcy Attorney
There are many negative myths surrounding bankruptcy. However, Chapter 7 bankruptcy can be hugely helpful for those facing immense and overwhelming consumer debt. If you are dealing with creditor harassment, potential lawsuits, and are struggling to stay afloat, contact an experienced Alabama bankruptcy lawyer at Grainger Legal Services. We serve clients from offices conveniently located in Montgomery, Prattville, and Troy, as well as throughout Alabama. Call us at (334) 260-0500 or contact us online to schedule a consultation.