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Chapter 7 Bankruptcy FAQs

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What debt can I get discharged (eliminated) in chapter 7 bankruptcy?

A person can discharge all unsecured and non-priority debt under Chapter 7 with certain exceptions such as student loans, government taxes, child support, alimony, fraud or misrepresentation in obtaining goods or services, government fines and penalties.

What are unsecured debts?

Unsecured debts are debts that are not collateralized or latched to any physical item. Such debts include, but are not limited to, credit card debts, hospital bills, personal loans, telephone bills, utility bills, (provided you no longer use their services, back rent if you no longer live in that apartment) doctor's bills, dentist bills and even legal fees. A car loan can also be discharged only if you surrender the car or it has been repossessed. Similarly, debt on a promissory note of a house that was already foreclosed can also be discharged through chapter 7 of the bankruptcy code.

What are secured debts and can they be discharged?

A secured debt is a debt that is collateralized by a tangible object such as a car or mortgage on a house. These debts cannot be discharged because the court's position is that it would create a windfall for the debtor if that debtor were allowed in bankruptcy to get a discharge and be able to keep those items.

Are there any debts that are not secured but are non- dischargeable?

Yes, student loans, taxes that are more than 3 years from when due, fines and tickets, child support, alimony, debt as a result of fraud, debt incurred as a result of willful injury to another person or property; and injury or death resulting from a DUI/DWI.

If I file bankruptcy, will I lose all my personal property?

No there are certain exemptions provided by law that you can claim which would not be seized or taken away from you.

Here are examples of some exemptions:

Household goods - you can claim such exemptions of house goods like furniture, tv, electronics, clothing, up to $12,625.00. You can exempt one motor vehicle up to $3,775.00, jewelry up to $1,600.00, tools of the trade up to $2,375.00, and a personal injury claim up to $23,675.00.

There is also a wild card exemption of $13,100.00. However, the actual amount will be deducted from any exemption claimed. In other words, if you claim $2,000.00 in cash, you can only claim $11,100.00 in other exemptions such as, stocks, bonds and tax refunds.

If you own a car worth $5000.00, the car exemption allowed is $3,775.00. This means that $1,225.00 of that car is not covered by the auto exemption. However, you may claim that $1,225.00 under the wild card exemption provided you still have a balance of the wildcard exemption left.

Note: If you own a house and claim a homestead exemption on that house, then you cannot claim any cash or wild card exemption.

Will I lose my car?

You can claim an exemption of $3,775.00 on a car based on the trade-in value and the condition of the car. If a car is equipped for a disabled person, the exemption is $10,000. If the car is being financed, the exemption will be calculated based on any equity left after you paid your car note.

Can I keep my bank account open?

Yes, you can keep your bank account open. However, you should only keep a maximum of $2,000.00 cash should you file bankruptcy.

Would I lose my house if I claim Chapter 7 bankruptcy?

It depends on how much equity you have in your house. Equity is the money you will net or receive after all necessary expenses on the house is paid for at closing. i.e. promissory note, transfer tax, a real-estate broker, etc.

Example: House sells for $100,000.00, closing cost was $10,000.00. $90,000.00 is the equity of your house. Anyone who files a Chapter 7 or Chapter 13 can claim up to $170,825.00 of equity exemption. This exemption is called the homestead exemption. To qualify for this exemption, the person must reside or live in that particular home continuously for more than 2 years.

If the husband and wife are filing Chapter 7 bankruptcy jointly, each one can claim the $170,825.00 homestead exemption. In other words, filing a joint chapter 7 petition, the couple may claim a $341,650.00 homestead exemption.

As noted before, once you claim the homestead exemption, you may not also claim any cash exemption.

What is the first step to filing bankruptcy?

First, call (718) 710-4111 to speak to an attorney and/or schedule an appointment with Park & Nguyen. You will be interviewed by one of the attorneys at Park & Nguyen. We will do a complete intake of your personal and financial background upon your initial visit.

You will need to gather and provide information requested in order to prepare your bankruptcy petition. You will have to take the first of two required counseling courses before we file your petition. The first course is credit counseling. The course is designed to see if you qualify to file for chapter 7 or chapter 13 bankruptcy. This course can be taken on the internet or by telephone.

Upon furnishing all the requested documents and completing the first required course as well as paying all fees, we will file your bankruptcy petition. You will review your bankruptcy petition to make sure that all information on your petition is correct. We will then file your bankruptcy petition electronically.

Generally, within one month you will attend a hearing which is commonly referred to as a 341 hearing (from section 341 of the bankruptcy code - meeting of creditors and equity security holders.) An attorney from our office will attend the meeting with you. Usually, individual creditors are absent from this meeting but you will be questioned by a trustee on behalf of all creditors.

In addition, you will need to complete the second class required by the bankruptcy code. This class can be taken after we file your petition. Once the trustee concludes his/her examination of you, he/she will then close the meeting.

NOTE- The court will not discharge your debt until they receive proof that you have completed both of the aforementioned required courses. Your case will remain open for the next 60 days to allow your creditors an opportunity to challenge any of your statements recorded at the 341 hearing.

If there are no objections, your case will be placed on the next court calendar call for the assigned bankruptcy judge to sign and discharge all your debts. You will receive a letter from the court between 3-4 months notifying you that your debts have been discharged and your bankruptcy case has been closed. The bankruptcy process takes approximately 4-5 months from the initial filing of your case.

Will my creditors stop harassing me?

Yes, once the petition is filed your creditors must cease all actions for collections by law, including any phone calls to your home or job.

Does filing bankruptcy mean I lose credit forever?

No, this is a popular misconception. It only means your credit will be impaired and there will be a note that you filed bankruptcy on your credit report for a period of up to ten years. However, you can take measures to repair your credit over time, such as obtaining secured credit cards. Park & Nguyen can provide this information to you.

Schedule your free phone consultation by calling us at (718) 710-4111. We are committed to offering thorough representation you can rely on to help you turn over a new leaf.

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