Chapter 7 Bankruptcy Questions and Answers

How the Current Bankruptcy Laws Affect You

Nov 23, 2009 Asa Ghaffar

Considering filing chapter 7 bankruptcy? Interested in finding out how the 2005 bankruptcy laws affect you? Find out the answers to the most common bankruptcy questions.

Those who are considering filing chapter 7 bankruptcy are often confused by the different rules and regulations that determine eligibility. This article will provide readers with answers to key bankruptcy questions. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 has introduced a number of important changes.

Bankruptcy Questions

Chapter 7 isn't the only way of negotiating serious debt problems so it is important to get credit counseling from a suitably qualified advisor, particularly with respect to Debt Management Plans and debt settlement programs. Whether one of these options is selected will depend largely upon whether the insolvent has sufficient disposable income to contribute towards a debt solution.

Is Filing Chapter 7 Bankruptcy Possible?

The new bankruptcy laws mean that the insolvent will need to qualify under a means test. In order to prevent abuse of the rules, personal income must not be above the median for the state that person lives in. However, an attorney may be able to help legally reduce the level of income. Those who still don't qualify may still be able to file under chapter 13.

What Debts Can be Discharged Under Existing Bankruptcy Laws?

It is possible to discharge most debts, including credit cards, unsecured loans, repossession deficiencies on cars and homes, payday loans and unpaid utility bills. It isn't possible to clear secured debt (where the borrower wishes to keep the asset), alimony, child support and most taxes by filing chapter 7 bankruptcy.

How Will Car Loans be Affected?

Should an individual want to keep their vehicle, it will not be possible to write off the car loan. Under the current bankruptcy laws, the debt will need to be reaffirmed in order that repayments can continue. Should the car have been returned, any repossession deficiencies can be cleared. It is important to appreciate that a car loan is a secured debt and will be treated accordingly by the U.S. courts.

Will Property be Lost Under the Current Bankruptcy Laws?

It will normally be possible to continue to live in a primary residence, although there is a maximum value for each state. This should be checked with a bankruptcy attorney. Repayments on mortgages and home loans will need to be made externally to the agreement. No U.S. court will allow someone to keep a second or holiday home.

Is it Possible to Attain Credit After Bankruptcy?

Although filing chapter 7 bankruptcy will show on a credit report for 10 years, it is possible to start to recover relatively quickly. Making reliable repayment on car loans, home mortgages and other credit agreements will be reported to credit reference agencies. This will mean that many discharged bankrupts will qualify for credit within 2 to 3 years.

Is Student Loan Bankruptcy a Possibility?

The overwhelming majority of individuals will need to find an alternative way to negotiate unpaid student loan debt. This is because allowing students to discharge debt by filing chapter 7 bankruptcy would open the floodgates. However, a small number of people will be able to write off their loans if they are able to prove that they have a long-term illness or injury that seriously affects their earning potential. They will also need to prove that continuing to make repayments will cause severe financial hardship.

Further Bankruptcy Questions

This guide to filing chapter 7 bankruptcy is not intended to be a panacea. Should the insolvent have a question that isn't answered above, they should consult a suitably qualified bankruptcy attorney or debt counselor. Most people will be discharged about 4 to 6 months after filing.

Sources

"United States bankruptcy courts." U.S. Courts.

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