Chapter 7

Chapter 7 wipes out many (or most) of your debts quickly and allows you to keep “limited” amounts of your property.  The limits can be quite generous or everything you have though.

In most cases, it stops garnishments, lawsuits, and harassment permanently. It also stops repossessions and foreclosures temporarily, but, in many cases, not permanently. Chapter 7 is a good solution for medical bills, credit card/department store debts, some old taxes, and most other unsecured debts. It is usually not a good solution if you are behind on your mortgage or your car payments.

If the Debt Relief you need is available through Chapter 7, it is preferable to Chapter 13, because the relief is fast, there are no payment plans to monitor, there are no Trustee’s fees to pay, and the attorney’s fees are less. But the relief is more limited than in Chapter 13.

Basically, if:

1) Your financial problems revolve mainly around medical bills, credit cards, and department store charges; and/or,
2) You owe old, filed and assessed income taxes (over three years old); and/or,
3) Your income is “average” or below average and only seems to cover the necessities for your household; and
4) You rent, your house is heavily mortgaged or has $15,000 or less of equity (or a smaller amount for a mobile home); and/or,
5) Your cars are worth less than $3,000 or are heavily financed; and,
6) You are current on your house and car payments,

then Chapter 7 might fit you. Chapter 7 fits about one half of the people who employ us in connection with Debt Relief.

There are income-based limits on who may file Chapter 7, called the “means test.”  The means test is complex — we spend a lot of time working this for you.  And we recommend always exploring the possibility of a Chapter 7 before considering other options because it’s quicker and cheaper in most cases.

Further reading: Worried about the means test? Part I and Part II.