Chapter 7 FAQs

Chapter 7 FAQs

A person who is burdened by financial debt often does not know how to start getting out of the situation in which he finds himself. At Ariano & Reppucci, PLLC, we have attorneys available to answer chapter 7 FAQs over the telephone and via an online case evaluation tool. However, there are a number of questions that we hear regularly. As such, we have included some of the most frequently asked questions which are provided below for your review and consideration:

What does Chapter 7 mean?

This is a type of bankruptcy that is intended to discharge many forms of unsecured debt in order to provide the person with a clean financial slate from which to move forward. A person must meet certain income requirements to be able to file this type of bankruptcy action. An individual who proceeds through this type of bankruptcy must turn all non-exempt assets over to the bankruptcy trustee, who will liquidate the assets and make payments to the creditors.

Can all debts be discharged in Chapter 7?

No. However, many different types of debt can be discharged, including the following:

  • Credit card debt;

  • Medical bills;

  • Other miscellaneous unsecured debt;

  • Secured debt where the person filing the bankruptcy action is willing to turn the asset over to the bankruptcy trustee; and

  • Certain income tax debts that have been outstanding for a requisite period of time.

What type of debt cannot be discharged?

  • Student loans;

  • Alimony;

  • Outstanding child support payments;

  • Some types of tax liabilities; and

  • Debts that were incurred through fraudulent activities.

If I own my home, can I file a Chapter 7 bankruptcy case?

The short answer is yes, but there are many issues to consider. If a person has equity in the home, he may turn the residence over to the bankruptcy trustee to be sold, with the proceeds being used to satisfy outstanding debt. Under Illinois exemptions, which permit a person filing for bankruptcy protection to retain certain types of property up to a specific value, a person may keep a home if there is $15,000 or less in equity in the property when there is an individual owner and up to $30,000 when there is a couple who own the home. There also is the possibility of reaffirming the debt under certain circumstances, which means that the debt cannot be discharged in bankruptcy for at least eight (8) years.

Can anyone file a Chapter 7 action?

No. A person must meet certain income requirements in order to file a Chapter 7 case. These income levels vary based upon the size of the household and if the filing party is below the Illinois median income for that household, he may file a Chapter 7. If the income exceeds the median, then there must be an analysis done, known as a means test, to ascertain if the income and expenses of the individual results in income over a five-year period that is low enough to qualify for a Chapter 7 case.

Will I have to sacrifice my retirement accounts?

In most cases, a person’s pension, 401ks, and other retirement accounts will be protected in a bankruptcy case. The analysis depends on whether the person contributed to the accounts before taxes were deducted or after. An experienced bankruptcy attorney can help a person understand what accounts are subject to turnover to the bankruptcy trustee and what accounts are exempt from liquidation as part of the bankruptcy process.

How will a Chapter 7 affect me going forward?

A person who successfully goes through a bankruptcy case will be in a strong financial position because most unsecured debt will be discharged and he will have payments that he can manage. However, the bankruptcy will appear as part of his credit history, impacting the ease with which the person can obtain credit to do things like purchase a car or buy a home. A Chapter 7 case will remain on a person’s credit report for 10 years. This does not mean that a person cannot build strong credit long before the end of that time period.

chapter 7 FAQsIf you live in the Chicago area, a skilled Illinois bankruptcy attorney is ready to assist you with the bankruptcy filing that is right for you. Call AZ Debt Relief Group, PLLC at (602)-466-9631 to schedule an appointment. If your Chapter 7 FAQs were not answered, call us. Often, we can answer many of your chapter 7 FAQs over the telephone.