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We know. It’s not the best situation. We’ve been there. And surprisingly Chapter 7 bankruptcy is the simplest and most common type of bankruptcy to file, so you’re not alone. The biggest difference between a Chapter 7 and Chapter 13 is that a Chapter 7 case does not involve filing a repayment plan. On the other hand, any assets not protected by an exemption may be sold by the courts, and the net proceeds distributed amongst the debts owed. Some “property” may be subject to liens and mortgages that give the property to other creditors, while some exempt property may be kept. However, with the right trustee, in 99% of cases, the case is closed without selling anything that belonged to the debtor.

A Chapter 7 bankruptcy case is for individuals with a limited income below the median income for their state. This determines their eligibility.

Eligibility also means that individuals do not have the means to pay back even a portion of their debts.

If your income is too high, and your debts are primarily consumer debts, you will most likely be required to file a Chapter 13 bankruptcy. However, we recommend enlisting the help of an experienced bankruptcy lawyer, and he/she will work hard to give you the best options. The Bankruptcy Attorneys at Hines Law have the experience and knowledge to help you every step of the way.

How to file

The first step in filing your chapter 7 bankruptcy is to file a petition with the bankruptcy court in your area. This includes filing: schedules of assets and liabilities, a schedule of current income and expenditures, a statement of financial affairs, and a schedule of executors contracts and unexpired leases. This is the most important, time consuming, and tedious part of the process, which is why it is helpful to have a lawyer at this time.

The list must include complete addresses of the creditors, non discharegeable and reaffirmed debts, property, and your choice of exemptions. Any false or reckless information could prevent you from getting your debts discharged, and all information must be signed under penalty of perjury. Again, it is highly recommended to use a lawyer at this time, there’s no sense in filing if a mistake is made along the way.

If you are married, you may file a joint petition and all information for both spouses must be gathered. But whether you are filing joint or individual, there are of course, fees to be paid. The courts are required to charge a case filing fee, miscellaneous administrative fee, and a trustee surcharge. Typically, the fees must be paid to the courts upon filing, however in some cases, installments may be made. If your income is 150% below the poverty line, and you cannot pay the court fees, the court may choose to waive the fees. Lastly, any fees owed to your lawyer must be paid in full.

Types of property exemptions
As mentioned above, although your assets could be liquidated and sold, there are a few property exemptions that you will get to keep. Depending on your situation, there is protection and the following varies.

Some examples of exemptions include: (1) homestead up to $23,675 in equity, (2) motor vehicle up to $3,775, (3) personal property up to $12,625, (4) retirement accounts up to $1,283,025, (5) health aids for their entire value, (6) jewelry up to $1600. Married couples filing, can typically double their exemption amount.

What happens to your credit

Filing for bankruptcy means you accept the fact that your credit score will plummet, and there will be a permanent mark on your credit score. You can, however, rebuild your credit, it just takes time and financial discipline. Unsecured debts such as credit cards and medical debts may be discharged, but this can take up to 6 months after filing.

If you are in a position where your debts grossly outweigh your income, a Chapter 7 bankruptcy may be the best decision for you. It may be a permanent change, but a permanent change in a new direction.

Deciding which debt relief plan is the right choice for you depends on your debts, assets, and your income. Our Bankruptcy Lawyers locally here in Massachusetts understand the bankruptcy laws and can help guide you through the process, so that you avoid problems and benefit the full protection you deserve. At Hines Law, MA we aid our clients with supportive as well as compassionate advice when it is required most. Call us today for a Free Consult and to learn more!