Everyone finds themselves in debt sooner or later. Most people can get out of it rather quickly, while others struggle and have to file for bankruptcy. When the debt overrides the income, it’s time to look into a Chapter 7 Bankruptcy attorney. Knowing about bankruptcy and the steps to filing Chapter 7 with an attorney is essential. The system is not meant for abuse, and the attorney will know the best route during the consultation process.

What is Bankruptcy?

Bankruptcy is compared to the debt to income ratio. The person in debt will no longer be able to keep up with paying the bills and fall behind. If the debt is over a certain percentage of income, then a cycle begins to form. It is a downward spiral; the only way out is to file bankruptcy. 

There are two types of bankruptcy. The first is the most common, Chapter 7, and the other is Chapter 13. Both are designed to put a stop to debt collectors while the process takes place. Chapter 7 eliminates almost if not all of your debt through consumer and business. It takes a couple of months but allows the person to get back on the train and work toward rebuilding their credit. 

Chapter 7 Bankruptcy

The two main possessions are the home and the vehicle. If there is a mortgage and loan for both, the person may be able to keep the house and car, provided they are current on their payments. Most credit cards and loans are wiped out, but this is not always the case. It depends on how much income a person receives compared to the amount of debt. Not all debt is removed. There is a process we will go further down the article that determines if the client is eligible for filing Chapter 7.

Chapter 13 Bankruptcy

If the client doesn’t qualify for Chapter 7, then they are tried in Chapter 13 Bankruptcy. There is a repayment plan to follow that covers the debt for an agreed amount. It is mainly meant to slow down or halt repossessions and foreclosures. Chapter 13 works better than 7 if you are behind on payments. But let’s discuss the process of filing Chapter 7, which is usually the route lawyers try first.

The Process of Filing for Chapter 7 Bankruptcy

You can get with a bankruptcy attorney to get the complete information needed to file Chapter 7. Here is the list of the procedures you and the attorney will take to get you back on your feet.

1. Analyze the Debt Accumulated

Take all of your bills and lay them out in front of you. Then take your income and determine the ratio of how much you make versus how much you owe. Chapter 7 will not cover tax debts, student loan balances, and child support. These are the bills you can tally up to see what can get taken care of under Chapter 7:

• Medical bills;
• Credit card debt;
• Phone, cable, gas, and electric bills;
• Payday and personal loans;
• Car and apartment leases;
• Membership dues and other expenses;
• Mortgage.

2. Seek Attorney Consultation

Get with a Chapter 7 bankruptcy attorney and see your options. The attorney will know if you can keep your house and vehicle during the process. If the attorney can proceed with helping you file Chapter 7, there will be upfront fees to pay the attorney to begin the process. Once the legal paperwork begins, the attorney will go to work immediately, start with the bill collectors, and stop them from contacting you.

3. Pass the Chapter 7 Test to See if You Qualify

There is a test to see if the income is low enough to go after Chapter 7. If they do not meet the standards of the income level, then they can try Chapter 13. These are the tests to see how they figure if you qualify:

• Gross income six months before filing is calculated;
• The six-month income is doubled;
• The final number is compared to the state and family size to see if it is lower than the U.S. Trustee Program.
• If the gross income is at or less than what is written in the program, the attorney will file Chapter 7.

4. Pass a Credit Counseling Course

All those who file bankruptcy must take a course to file Chapter 7. They explain techniques for getting out of debt and staying out of it. The course is taken by phone or online and is done 180 days before the filing process begins.

5. Fill out the Chapter 7 Bankruptcy Forms

The attorney will help fill out the forms and submit them to a trustee.

6. Meet with Trustee 

The answer comes from meeting the trustee as they review the case. From there, the attorney and client can accept, object, or file motions for disagreements.

7. Finish the Debtor Education Course

The last thing is to finish the second course in debt education. Once this is completed and you obtain the certificate, the Chapter 7 bankruptcy will take effect.