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Mueller Bankruptcy Guide
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   Chapter 7 Bankruptcy
(Eliminate Debts)

Chapter 7 is the most common form of bankruptcy. Individual debtors who are unable to meet their bills and need a fresh start can benefit from Chapter 7.  It may also be used by businesses that wish to liquidate and terminate their operations. Although changes to the Bankruptcy Code have made the process more complicated, most debtors can still eliminate debts and get a fresh start through Chapter 7 Bankruptcy. In most cases, you can keep your personal property, including your car. In many instances, debtors can keep their homes.

The Chapter 7 Process:

To determine if Chapter 7 is right for your situation, your attorney will review your financial information. If Chapter 7 is appropriate, the case begins with preparation and filing of a bankruptcy petition, schedules, and associated documents. In most cases you do not have to go to court. However, you will have to attend a short hearing held by the Chapter 7 bankruptcy trustee called a meeting of creditors. At the meeting, the trustee will review your petition and schedules and ask some questions. About three months after the meeting, you will receive a discharge of your debts signed by the judge. From beginning to end most Chapter 7 case take about four months.

Debts You May Eliminate Under Chapter 7:

With a few exceptions, Chapter 7 eliminates:

  • Credit card debts
  • Medical bills
  • Lawsuit debts/civil judgments (including personal injury)
  • Personal loans
  • Some taxes, including back state, local, and federal income taxes.
  • Deficiency debts on foreclosures and repossessed vehicles

There are some debts that may not be discharged, such as student loans (unless there is undue hardship), alimony and child support, damages for personal injury to someone else resulting from DUI, criminal fines and restitution, court fees, and certain taxes.

Property You Can Keep Under Chapter 7:

Up to a certain value, most items of personal property are exempt (meaning the debtor can keep them). In over 90 percent of consumer bankruptcy cases, debtors keep all of their personal property. Exempt property can include:

  • Equity in the debtor's home
  • Motor vehicles
  • Clothing
  • Household goods and furnishings
  • Household appliances
  • Jewelry
  • Pensions, including money in 401k plans
  • Tools of the debtor's trade or profession
  • A portion of unpaid but earned wages
  • Public benefits, including public assistance, Social Security, and unemployment compensation, accumulated in a bank account
  • Damages awarded for personal injury

For more detailed information on Chapter 7 bankruptcy, please visit our FAQ and our Philadelphia Bankruptcy Attorney Blog.

Chapter 7 is not the right choice in every case, and there are alternatives. Other options include Chapter 13, debt negotiation/debt settlement, and mortgage foreclosure defense. If you would like to speak to an experienced Pennsylvania bankruptcy attorney about the option available to you, call Dan Mueller at (215) 248-0989.
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