CHAPTER 7 BANKRUPTCY

Wipe Out Your Debts for A Fresh Start

Call 206-624-9605 for a Free Case Evaluation

Seattle Bankruptcy Attorney David M. Lux

Chapter 7 Bankruptcy Completely Discharges (wipes out) Unsecured Debts What is an Unsecured Debt? An unsecured debt is a debt with no collateral attached to it. Credit cards and medical bills, are the most common types of unsecured debts. There are other examples of unsecured debts listed below. The filing of a Chapter 7 bankruptcy will also stop garnishments and civil lawsuits and, in most cases, discharge the debts underlying these proceedings. The length of a Chapter 7 bankruptcy case is typically 3-4 months from filing the bankruptcy petition to the final discharge of debts. Questions about bankruptcy? First Name: Last Name: Phone: Email: Question: Enter the security code above*

Below is more detailed information regarding Chapter 7 bankruptcy. 

Characteristics of Chapter 7 include:

Wipes Out Your Unsecured Debts

Debts are wiped out (discharged) that have no assets attached to them:   Credit Cards   Unpaid Medical Bills   Car Repossession Deficiencies   Personal Loans   Payday/Cash Advance Loans   Most Collections and Lawsuits

Permanent Discharge of Secured Debts if the Secured Property is Surrendered

For example,the secured loan on a car is wiped out (discharged) where the car is repossessed and where you owe more than the car is worth (a repossession deficiency). If not already repossessed, the property can be surrendered before or after you file for bankruptcy.

The Automatic Stay:
Stops Creditor Harrassment and Collection Activity

After you sign the Chapter 7 petition and schedules prepared for you by us, we will electronically file all documents with the Clerk of the United States Bankruptcy Court. Immediately upon filing, a protection order is entered by the Court to protect you from all creditor action. The bankruptcy court orders all creditors to stop all harassing phone calls, lawsuits, threats, judgments, repossessions, and garnishments. This protection Order is known as the "Automatic Stay".

Property You Can Keep

Most people keep all of their property in a bankruptcy. If you have furniture and household goods of average value and are willing to keep up your car payment(s), you will most likely keep all of your personal property. Retirement accounts (401k, IRA, etc) are also exempt property you would keep following a final discharge of your unsecured debts in a bankruptcy proceeding. 

Keep Your House and Car In a Chapter 7 bankruptcy, you may continue to pay your mortgage or your car loan and keep the house or car by signing a "Reaffirmation Agreement". In effect, the Reaffirmation Agreement takes the place of your original agreement and essentially makes it as though you have not filed a bankruptcy on those particular loans.

Usually homeowners who file for bankruptcy do so because they do not have enough equity to refinance their home to pay of their unsecured debts. So long as you do not have more than $125,000 of equity in your home after typical closing costs from a sale, you virtually assured of keeping your home so long as you continue to make your mortgage payments (and secured lines of credit, if any). Our firm will assist you in doing a fair market analysis of your home to ensure you home will be protected if you file for bankruptcy protection.

So long as you continue to make your car payments, you can typically keep your vehicle(s). Most people who have car payments do not have enough or any equity in their vehicle for the cars to be considered non-exempt. In fact, in the majority of cases, people owe more than the car is worth. Only in cases where you have a car that is worth far more than the owe on it or a car of significant value where you have no loan on it at all would not be allowed to keep your vehicle in a bankruptcy proceeding.

Chapter 7 also gives you an option to "redeem your vehicle". This process involves you paying the secured creditor the fair market value of the collateral, which is typically far lower than the amount you still owe on your current car loan when you purchased your vehicle. In exchange for redeeming your vehicle, the creditor provides you with the release of their lien. There are several redemption finance companies we can refer you to that will provide you with a loan with new, lower payments based upon your vehicle’s current, fair market value.  

Property You Cannot Keep

	high value cash and bonds (not part of a retirement account)
	investments over a certain amount
	a second car (for single, non-married debtors)
	a second home
	family heirlooms over a certain value
	valuable collections such as paintings, coins, or stamps, and expensive trade or business equipment

The State Median Income Level

Under the new bankruptcy laws effective October 17, 2005, if your income is above the Washington State's median income, you may not qualify for Chapter 7 protection. Under our website section, “Will I Qualify for Chapter 7?", you will find a list of the state median income for individuals and married couples with or without dependent children.

Non-Dischargeable Unsecured Debts

Certain unsecured debts are not dischargeable in a Chapter 7 bankruptcy and must continue to be repaid in full. These include unpaid taxes, government- backed student loans, and unpaid child support. However, in many cases, your monthly payments of these debts can be restructured and lowered by filing a Chapter 13 Bankruptcy. (For more information, see our section  under the tab "Chapter 13 bankruptcy".)

Call 206-624-9605 for a Free and Confidential Attorney Consultation with One of Our Experienced Seattle Chapter 7 Bankruptcy Lawyers.