What is Chapter 7 Bankruptcy?
Chapter 7 is the most common and simplest of all the chapters of bankruptcy. It’s a federal court proceeding designed to help financially distressed individuals and businesses manage their debt.
When you hear that someone filed bankruptcy it’s usually a chapter 7. They take approximately 90 days to complete from beginning to end and they wipe out or discharge most unsecured debts, like credit card debt. To qualify you have to be able to show that you do not have the ability to repay your debts and your income is below the Median income for the area you live.
Chapter 7 is the Most Common Form of Bankruptcy
Chapter 7 bankruptcy allows you to discharge all or most of your debt and get a fresh financial start in life. Before filing, you’ll need to determine whether you qualify and whether you’ll be able to keep all or some of your property. Most people who file chapter 7 can keep their assets.
Once your forms are completed and filed, and the documents sent to the bankruptcy trustee appointed to your case, you will attend the meeting of creditors, and complete a second debtor education course. You’ll receive the bankruptcy discharge wiping out your debt in approximately 3 months.
In order to qualify for Chapter 7, you’ll need to meet the income requirements. If you do qualify for a Chapter 7, you will be able to get rid of most of your debt if your debt is unsecured debt, like credit card debt, medical bills, and collections. If you have excess income, you won’t qualify for a Chapter 7 but may still be eligible for a Chapter 13 bankruptcy.
In addition to getting rid of your debt, most people typically can keep all of their property, that is, if the values are within the bankruptcy exemption limits, of which most people who file are. The typical person who files bankruptcy keeps their cars and home.
It’s important to keep your car and mortgage payments current since creditors usually offer reaffirmation agreements which allows you to keep the property and continue to make the scheduled payments on the loan. We can explain more regarding the bankruptcy process to you during your first consultation.
Put a Stop to Creditor Harassment
If creditors are bothering you at work, harassing your family, friends, and neighbors, or calling at all hours—we can help. We’ll keep the creditors off your back. Though you may want to keep paying some debts, like your home or car, you can stop paying most creditors immediately.
Eliminate Repossession Debts
After a vehicle finance company or bank repossess your car, they auction it to reduce their loss. You’re still responsible for the balance after the sale proceeds are deducted, called a ‘deficiency balance’. A Chapter 7 bankruptcy can eliminate your liability for the entire deficiency balance. Remove the risk of lawsuits and garnishments by filing a Chapter 7 bankruptcy.
A Chapter 7 bankruptcy is one of the most effective ways to immediately stop garnishments. Garnishments can diminish your hard-earned income making it nearly impossible for you to afford basic necessities. By filing a Chapter 7 bankruptcy and stopping the garnishment, you’ll be able to use your income for more important necessities in life and start saving for your future.
End Lawsuit/License Suspensions
Many states have imposed laws that allow the state to suspend your license if you failed to maintain liability insurance at the time of the accident. We can help you get your license reinstated if it is suspended due to an uninsured car accident or unpaid parking tickets. Our attorney can also stop lawsuits related to those car accidents.
If you’re being sued, and you own a home, we strongly urge you to speak with an attorney as soon as possible about filing bankruptcy. A bankruptcy will stop a lawsuit immediately and prevent your creditors from placing a lien on your home or garnishing your hard-earned wages.
Rebuild Your Credit After Bankruptcy
One of the most common concerns that we hear from clients has to do with the stigma related to bankruptcy. The stigma against debtors has greatly diminished over the last 20 years, and there is no indication that debtors will be treated less favorably in the future. In fact, the ability to reestablish your credit after a bankruptcy is better than it has ever been.
Though bankruptcy can remain on your credit report for up to 10 years, you can start reestablishing your credit immediately. Most people if they effectively rebuild their credit can qualify for a home loan within two years after filing chapter 7 bankruptcy.
What Chapter 7 Does Not Eliminate
Filing for Bankruptcy will stop most collection actions and can get rid of many debts, but it does not get rid of all obligations. Debts that remain are:
- Student loans, except extreme hardship cases
- Debts for most taxes
- Debts for alimony, maintenance or support
- Debts for fines, penalties or criminal restitution
- Debts for personal injuries caused by driving intoxicated
- Debts incurred fraudulently
Chapter 7 Bankruptcy Income Limits in Washington State
The median income limits in Washington State change approximately every 6 months in April and November. The limits usually go up every 6 months but sometimes they do decrease. They’re based on the cost of living data from the IRS. For the most recent Eastern Washington median numbers review our article on Median Income Figures.
Washington State Chapter 7 Bankruptcy Exemptions
There are a lot of ins and outs to State exemptions, so you should always consult with a bankruptcy attorney to determine if your assets are protected through bankruptcy.
You can find the Washington State Chapter 7 bankruptcy exemptions which are codified in the Washington Revised Code under: RCW 6.13, RCW 6.15, RCW 6.27, RCW 51.32, RCW 50.40, RCW 48.18, RCW 6.48, RCW 74.04, RCW 6.32, RCW 68.24, RCW 41.28, RCW 41.26, RCW 41.20, RCW 41.24, RCW 41.40, RCW 41.32. The bulk of the Washington State exemptions are RCW 6.15 and RCW 6.13.
In Washington State, people filing bankruptcy have the choice to use either State or Federal exemptions to protect their assets. Most people that file bankruptcy actually use the federal exemptions which are different values and are codified under federal law at 11 U.S.C. Section 522. Your attorney when planning the bankruptcy filing chooses either State or Federal exemptions, whichever best protects your assets.
Chapter 7 vs Chapter 13 Bankruptcy
Chapter 7 is designed for people who have income below the median income limits and cannot afford to repay their creditors. It’s a simple proceeding that lasts 90 days.
Chapter 13 is designed for people who have income above the median income limits and have the ability to repay their creditors in some capacity. That repayment can range from pennies on the dollar to 100% repayment of debts. It is a more complex proceeding in which a person repays debts on a monthly basis for 3 to 5 years.
Who Can File Chapter 7 Bankruptcy?
People who have income below the median income limits and cannot afford to repay their creditors. Pursuant to Washington State chapter 7 bankruptcy laws you cannot file chapter 7 if you have previously filed a chapter 7 in the last 8 years. Businesses can also file, that is if they plan on permanently closing.
How Often Can You File Chapter 7 Bankruptcy?
Chapter 7 can only be filed once every 8 years, measured from petition filing date to petition filing date. But, you can file a Chapter 13 within four years of filing a chapter 7. People sometimes have to do this to protect themselves from creditors in unique situations.
How Many Times Can You File Chapter 7 bankruptcy?
You can file chapter 7 bankruptcy many times, really there are no limits to filing chapter 7 bankruptcy in Washington State so long as you do not file one within 8 years of a previous one. It’s common to see multiple filings in cases where people have large recurring medical bills or children with medical issues.
When Should You File for Chapter 7 Bankruptcy?
Filing Chapter 7 bankruptcy in Washington State is a complicated process so you should consult with an attorney to make that determination. Bankruptcy for most is an option of last resort when other options have failed. Many times it follows divorce, job loss, reduction in pay, or medical issues. Most people attempt to repay their debts but when they reach the point that they cannot repay them they turn to the option of bankruptcy.
How Long Does Chapter 7 Bankruptcy Stay On a Credit Report?
Chapter 7 stays on your credit report for 10 years and chapter 13 stays on for 7 years. But this is really not important in my opinion. The question is how long does a chapter 7 impact my ability to get credit?
The answer to that is it usually takes about 2 years to rebuild your credit well enough to buy a house. Buying a home after bankruptcy is likely the most important credit you ask a bank for.
How Much Does it Cost to File Chapter 7 Bankruptcy?
As far as legal proceedings go, bankruptcy is relatively inexpensive. Most Chapter 7 bankruptcies can be completed for $1,000.00 to $1,250.00. Which includes attorney fees and the court filing fees. Business bankruptcy usually costs more based on the facts of the case.
What are the steps in filing Chapter 7 bankruptcy?
There are 14 steps to filing Chapter 7 Bankruptcy.
- Analyzing Your Debt
- Filling Out Forms
- Verifying your Information
- Determining Eligibility
- Determining Property Exemptions
- Mandatory Credit Counseling
- Payment of Filing Fee
- Filing Your Chapter 7 Petition
- State how you will Handle Secured Debts
- Redeem, Reaffirm or Surrender
- Creditors Meeting
- Filing Objections or Motions
- Debtor Education Course
- The Discharge
Chapter 7 Bankruptcy Attorney
If you’re looking for an experienced Chapter 7 Bankruptcy Attorney, our firm will provide you with a range of fair fees right over the phone. We’ll give you a low attorney fee and allow you up to six months to pay the remaining fees, in amounts that fit your budget.
Under this payment plan, you can hire us with as little as $100, which will allow you to refer any creditors or collection agencies to our office. Once the fees are paid in full, your case will be filed. Call (509)921-9500 to schedule an appointment today or submit our no free no-obligation consultation form.