Chapter 7 Bankruptcy

Chapter 7 of the bankruptcy code is most often used to discharge credit card and other unsecured debt. A list of debts usually dischargeable under chapter 7 is as follows:

Debts usually discharged in a Chapter 7

  • Credit Cards
  • Unsecured personal loans
  • Medical and Dental Bills
  • Deficiency Judgments from Auto Repossessions
  • Auto lease mileage overruns
  • Pay Day loans
  • Utility Bills
  • Old telephone and cell phone bills
  • Certain Tax Debts ( call for specifics)
  • Overpayments of certain benefits

Debts usually NOT dischargeable in Chapter 7

  • Child or Spousal Support
  • Most Taxes (call for specifics)
  • Student Loans with any government guarantee

A Chapter 7 will generally not solve your mortgage foreclosure problems, for that you will need a Chapter 13.

Technically speaking, Chapter 7 is a liquidation or sale. In reality, nothing is ever sold in 99% of consumer cases because of the generous exemptions provided by the Federal Bankruptcy Code.
For example, you may exempt virtually an unlimited amount of money in an IRA, 401(k) or pension. You may exempt $21,625 per person in equity in your real estate after deducting 10% off the value. You may exempt $3540 in equity each in a motor vehicle, $11,525 each in household goods and furnishing, $1450 each in Jewelry, plus up to $11.975 in any property whatsoever.

The means test is used to determine if you can file Chapter 7. Part One of the means test states that if your income is less than the median for your size family in the state, you may automatically file a Chapter 7. The median income for Pennsylvania as of August 1, 2010 is as follows:

1 44,396 / year or $3700/month
2 53,572 / year or $4464/ month
3 67516 / year or $5626/month
4 77590 / year or $6466/month
5 85090 / year or $7091/month
6 92590 / year or $7716/month
7 100,090 / year or $8341/month

Even if your income exceeds the above amount you can still qualify for a chapter 7 bankruptcy by passing the second part of the means test. This is too complicated to explain here. You will need to come in for a free consultation and bring income documents (pay stubs or cash flow sheets) for the past six months.

As you can see, a telephone or office consultation at no charge is required to see if and how you might file Chapter 7 Bankruptcy to get rid of your debt and get a fresh start.