Chapter 7 Bankruptcy

Chapter 7 Bankruptcy

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The Legal Reality of Bankruptcy

Chapter 7 Bankruptcy for Overwhelming Debt

Chapter 7 protects you from being unduly harassed by creditors. By filing for Chapter 7, you can eliminate your legal obligation to pay certain over-burdensome debts such as credit cards, unsecured loans, medical expenses, and, in some cases, business debt. Moreover, Chapter 7 bankruptcy does not require any debt minimum for eligibility.


However, debt categories such as child support, criminal obligations, parking tickets, most taxes, car loans, mortgages, and, in most instances, student loans cannot be discharged through Chapter 7 bankruptcy.


To see if all your property can be protected from confiscation by Chapter 7, you are required to disclose all your assets. You are permitted to retain basic household items, pensions, hobby equipment, retirement accounts, and most life insurance policies.


To be considered eligible for a Chapter 7, you first must pass the means test, which calculates your gross monthly income based on an average of the past six months plus all other income from every member of your immediate household.


Note that in some cases, debtors who pass the means test may still not qualify for Chapter 7 protection because their income and monthly expenses may not permit it.


Even if you do not pass the means test or are ineligible for Chapter 7 for other reasons, you may still be able to seek debt relief under Chapter 13 bankruptcy law.


Bankruptcy has a lot of negative connotations. However, it is not uncommon for people to find themselves in insurmountable debt through no fault of their own. Chapter 7 bankruptcy can resolve these debt problems and protect individuals and families from overbearing financial strain and oppressive debt collection methods.


Benefits of Filing for Chapter 7 Bankruptcy

  • All actions by your creditors must cease
  • Wage garnishments must stop, and bank attachments must be released (no money can be taken from your bank account except by you)
  • Harassing phone calls and threatening mailings from creditors end
  • Your unsecured dischargeable debt, such as credit cards, medical bills, and unsecured loans, will be wiped out
  • If the utilities in your home have been shut down, they must be turned on again
  • You will be able to keep your motor vehicle(s) and other secured property if you keep up your payments

Areas of Practice 

After Bankruptcy, Then What?

More people than you might expect have been through the bankruptcy process, and while it can be taxing, there is life afterward. According to Rhode Island law, certain properties are exempt from repossession if you have filed for Chapter 7 bankruptcy. These include your household possessions, your jewelry and other personal items, the equity in your home up to $500,000, and your car if you keep up monthly payments.


If you are having trouble with paying your bills and are under stress from nagging collectors and creditors, act now. With swift action, you have a better chance of rectifying your situation and returning to a normal life. Take action today.

  • If I file for Chapter 7 or Chapter 13, will I have to relinquish all of my property?

    In Rhode Island, you are allowed to keep all exempted property with a few specific limits. You may also keep household goods such as appliances, clothing, dishware, furniture, books, and wedding rings. If you are buying a car using monthly payments, you may keep the vehicle as long as you maintain your monthly payments.

  • What is the means test?

    The Chapter 7 bankruptcy means test is a way of determining whether you can afford to pay back at least a part of your unsecured debt. If your income is below the median income in your area, you automatically pass the means test. If your income is above the median, you’ll be required to apply the means test formula.

  • What happens if I don’t pass the means test?

    You may still qualify for bankruptcy protection under Chapter 13, which requires you to pay off some portion of your full debt using a prescribed five-year payment plan.

  • Can a student loan be discharged under Chapter 7 or Chapter 13?

    No. Student loan debt is not discharged under Chapter 7 or Chapter 13 bankruptcy in most cases.

  • Am I able to get rid of a second mortgage with Chapter 13 bankruptcy?

    You might be eligible. Contact us to learn more.

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