How Chapter 7 Bankruptcy Can Reduce Or Eliminate Debt
Under Chapter 7, eligible people will have their debts greatly reduced or possibly discharged. Chapter 7 primarily serves people who have unsecured debts such as medical bills, credit card debt and personal loans. To learn if you can file Chapter 7, read on or contact today.
Who Should Consider Filing A Chapter 7?
- People who have little or no disposable income
- Those who are looking for a fresh start
- Loss of income in the household
- Those who can’t pay the household bills because of divorce or death of a spouse
- Those who have a garnishment against their wages or bank account
- Those who are laden with consumer debt
How Will A Chapter 7 Help?
- Discharge all unsecured debts
- Immediately stop all harassing calls and collection activities
- End garnishments and put you back in control of your accounts and income
- Allow you to begin repairing and restoring your credit worthiness
- Provides an opportunity for you to take control of your financial future
The Chapter 7 Means Test In Ohio: Do You Qualify?
Not everyone qualifies for Chapter 7 bankruptcy. To determine eligibility, the bankruptcy court uses what is known as the Chapter 7 means test. In simple terms, the test compares your household income to the median income for a household of similar size in Ohio.
If your income falls below the median, you will generally qualify for Chapter 7. If your income exceeds the median, the analysis can continue. The second part of the means test considers certain allowed expenses and deductions, including:
- Housing and utility expenses
- Healthcare costs
- Taxes
- Child care expenses
- Secured debt payments, such as mortgages and vehicle loans
After deductions are applied, the court determines whether you have sufficient disposable income to repay creditors.
Common reasons people qualify for Chapter 7 include recent job loss, reduced household income, medical expenses, divorce or overwhelming unsecured debt. On the other hand, individuals with higher disposable income after deductions may not qualify.
If your income exceeds the Chapter 7 limits, Chapter 13 bankruptcy may still provide meaningful debt relief through a structured repayment plan. An experienced bankruptcy attorney can evaluate your financial circumstances and help determine the most effective option.
Common Chapter 7 Mistakes To Avoid
Filing for Chapter 7 can provide powerful debt relief, but mistakes during the process can create delays, complications or even jeopardize your case.
Some of the most common mistakes include:
- Transferring assets before filing: Giving away property or transferring assets to family members before bankruptcy may raise concerns and lead to additional scrutiny.
- Running up debt before filing: Large purchases, cash advances or luxury spending shortly before filing may not be dischargeable.
- Incomplete or inaccurate paperwork: Bankruptcy filings require detailed financial disclosures. Missing information can delay your case or create credibility issues.
- Missing the 341 meeting: Attendance at the meeting of creditors is mandatory. Failure to appear can result in dismissal of your case.
- Failing to complete credit counseling: Bankruptcy law requires approved credit counseling before filing and a debtor education course before discharge.
- Not disclosing all assets: Even assets you believe are exempt or insignificant must be disclosed. Full transparency is critical throughout the bankruptcy process.
Many bankruptcy problems occur because individuals attempt to navigate the process without fully understanding the requirements. Careful preparation and accurate disclosures can help prevent unnecessary setbacks and keep your case moving toward a successful discharge.
Learn The Truth About Chapter 7
Many people that contact me about bankruptcy are concerned that they have been or are about to be garnished, or they are about to lose their home. They are worn down by the aggressive collection efforts and phone calls and have lost the ability to control where their money goes.
There are several myths associated with Chapter 7 bankruptcy:
- “Will I lose my house and car if I file?” You will not lose your house or car if you are current on the payments and there isn’t a significant amount of equity.
- “Will the Court make me sell all my stuff?.” You are allowed to keep a significant amount of possessions, jewelry and household goods. In most cases, my clients get to keep everything.
- “If I file bankruptcy is that going to affect my present or future spouse’s credit?” No. It only affects the person filing. And in the case of the person filing, it often is the beginning point of repairing and improving that person’s credit rating and worthiness.
- “Will I lose my tax refund”? Not necessarily. There are portions of your tax refund (i.e. earned income credit or child tax credit) that are exempt from bankruptcy.
Contact Robert Caplan, An Experienced Columbus Bankruptcy Lawyer
Mr. Caplan can help you to evaluate your financial options, and to put a stop to the harassing phone calls and letters from creditors and collectors. Contact him today, or call 614-252-2026 to schedule a free consultation, and work to bring an end to the pressure, and hope for your future.
Robert L. Caplan is a debt relief agent. He helps people file for bankruptcy relief under the Bankruptcy Code.