Chapter 7 Bankruptcy FAQs

Frequently Asked Questions About Chapter 7 Bankruptcy

Insights From Our Redlands Bankruptcy Attorney

Chapter 7 bankruptcy is a valuable tool for individuals who are in debt. This legal process helps debtors get relief from debts they cannot pay within a reasonable time. It will have serious effects on your financial life both positive and negative. Before you decide to file Chapter 7, you should know as much about the process as possible.

Here at Dolen, Tucker, Tierney & Abraham, we want you to be fully informed before you make a legal decision. This is why we have gathered many of the most common Chapter 7 bankruptcy questions to help keep you informed.

How Does Chapter 7 Bankruptcy Work?

When you file Chapter 7 bankruptcy, the court orders an automatic temporary stay. This stay prevents creditors from calling you, evicting you, repossessing property, foreclosing on your home, turning off your utilities, garnishing your wages or collecting payment. The court appoints a trustee to oversee your bankruptcy. A meeting with the trustee is required. After you meet with the trustee, the court will determine which debts to discharge.

Who Can File Chapter 7 Bankruptcy?

As stated on our Chapter 7 bankruptcy page, this process is available to individuals and businesses who need relief from overwhelming debts.

Do I Qualify for Chapter 7 Bankruptcy?

Considerations for filing for Chapter 7:

  1. Is your monthly income equal to or less than California's income median? A means test is used to determine if you make too much to qualify for Chapter 7 bankruptcy. This analysis is done by your attorney. It will determine if your monthly income is too high. The means test analysis can be complicated, so consider discussing your circumstances with an attorney.
  2. Is your monthly income sufficient to pay at least some of your debt through a Chapter 13 repayment plan?
  3. Have you filed Chapter 7 bankruptcy and received a discharge within the last eight years?
  4. Have you filed Chapter 13 bankruptcy and received a discharge within the past six years?
  5. Have you had a previous bankruptcy case dismissed within the past 180 days?
  6. Have you have completed an approved credit counseling program within the last 180 days?

How Long Does Chapter 7 Bankruptcy Take?

From filing to discharge, a Chapter 7 bankruptcy case can take up to four to six months. However, some complex cases can take longer. A bankruptcy attorney will help you estimate if your case could take longer than normal.

How Long Does Chapter 7 Bankruptcy Stay on Your Credit Report?

How long a bankruptcy filing remains on your credit report depends on which type of bankruptcy you file. For Chapter 7 bankruptcy, the filing will stay on your report for 10 years. This is due to Chapter 7 discharging debt without repayment. A Chapter 13 will be removed from your credit report after 7 years. In either chapter, the impact on your credit will decrease as time passes. Your credit will become more dependent on your financial management after filing.

How Much Does Chapter 7 Bankruptcy Cost?

There are several expenses tied to filing for Chapter 7 bankruptcy. These expenses can include:

  • Filing Fee for Chapter 7 - $338 (as of December 1, 2020)
  • Converting your Chapter 7 filing to a Chapter 13 filing - Free
  • Converting your Chapter 13 filing to a Chapter 7 filing - $25
  • Qualified credit counseling course - $19.95 and up
  • Credit report - $30 to $35 per person or couple
  • Attorney fees vary depending on complexity of case but generally are around $2,000 in California

An experienced bankruptcy lawyer helps filers avoid mistakes that could result in unnecessary loss of property or dismissal of their case.

How Often Can You File Chapter 7 Bankruptcy?

Currently, there are no limits on how many times you can file for bankruptcy. But there are limits on the time between filings. If the court previously discharged your debts through Chapter 7 bankruptcy, then you must wait 8 years before filing again. If you used Chapter 13 bankruptcy to discharge your debts, then you cannot file for Chapter 7 for four years. If the court dismissed a previous bankruptcy filing, you cannot file another bankruptcy case for 180 days.

When Should You File for Chapter 7 Bankruptcy?

Filing for bankruptcy is an important decision that you should not take lightly. Before you consider filing, analyze your financial situation thoroughly. Are bill collectors harassing you? Do your creditors refuse to negotiate on your payments? This may indicate a need to consider bankruptcy. Further signs include:

  • Anxiety about your debt
  • Minimum payments on your credit cards
  • Using credit cards to pay for necessities

Can I Keep My House in Chapter 7 Bankruptcy?

Whether you are able to keep your house in a Chapter 7 bankruptcy depends on your situation. Meeting the following criteria will help you keep your home in Chapter 7 bankruptcy:

  • If you are current on your mortgage payments
  • If state or federal homestead exemptions apply to your equity
  • If you can continue making mortgage payments in the future

Having too much equity in your home may convince the trustee to sell it to pay your creditors. If you are behind in mortgage payments, or you have too much non-exempt equity, you still have options. Consider filing Chapter 13 bankruptcy instead. Speaking to our experienced bankruptcy attorney in the Inland Empire will help you determine the right course to take.

Can You Include Student Loans in Chapter 7 Bankruptcy?

Discharging student loan debt with bankruptcy can be very difficult. Most debtors will not be able to get such debts (especial federal student loans) discharged. However, if repaying your student loans would cause you and your family undue hardship, you may be able to get the debt discharged. This process involves filing a separate action known as an "adversary proceeding." In this action, you would need to prove:

  • You would not be able to maintain a minimal standard of living if forced to repay the loan.
  • You will face hardship during a significant portion of your loan repayment period.
  • You made "good faith" efforts toward repayment before filing for Chapter 7 bankruptcy.

The U.S. Department of Education has even more resources to help with your student debt. Consult an experienced bankruptcy attorney if you feel that filing an adversary proceeding may be right for you. The law excepting student loans from discharge is currently under scrutiny and could be changed in the not-so-distant future.

Still Have More Questions About Chapter 7 Bankruptcy? Call Us Today!

As you can see, filing Chapter 7 bankruptcy is a complicated task. Hundreds of our clients got immediate peace of mind as we helped them smoothly navigate through the process. Don’t let the complications keep you from getting back on track financially. M. Wayne Tucker has over 30 years of experience practicing law. He focuses on bankruptcy cases that help individuals, families and small businesses get relief from debt and a fresh financial future.

To learn more about the bankruptcy process, and how Dolen, Tucker, Tierney & Abraham can help, call us at (909) 326-2769. Our no-charge consultation will help you determine if bankruptcy is right for you.