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Chapter 7 Bankruptcy: Your Debt Relief Options

Chapter 7 bankruptcy is the most common form of bankruptcy filed. It is commonly referred to as a “Wipe Out” or “Fresh Start.” To determine eligibility for Chapter 7 bankruptcy, you go through a series of tests to demonstrate that you cannot afford to repay anything to your creditors. The tests include:

  1. A means test, which verifies how much money was made in the last six months
  2. A budget analysis, which determines what your income and expenses will be going forward
  3. An asset analysis, which determines if a debtor owns too much property

If you don’t meet the requirements of the means test or budget analysis, you will have to repay what you can afford to your creditors in a Chapter 13 bankruptcy.

What Does Chapter 7 Bankruptcy Do?

Chapter 7 bankruptcy will discharge or wipe out most unsecured debts. Some common examples of unsecured debts are utility bills, credit card debt, medical debt and payday or signature loans. However, there are some bills that cannot be wiped out in a Chapter 7 bankruptcy. For example, debts that are incurred through fraud, owed on certain income taxes, owed for child support or incurred as a result of intoxicated use of a motor vehicle cannot be discharged or wiped out in a Chapter 7 bankruptcy. Also, if you have secured debt, meaning that a creditor has a lien on your property, and you want to keep your property, you will have to reaffirm or agree that such loans are unaffected by your Chapter 7 bankruptcy. Typical examples of secured debt are mortgages, car loans, title loans and financed furniture or electronics.

Most Chapter 7 bankruptcies are filed for debtors with large amounts of credit card debt and very few assets. In most of these cases, a Chapter 7 filing completely eliminates all of these debts. If you’re looking to alleviate your burden of debt and don’t have the means to pay any of it back, a Chapter 7 bankruptcy may be your best option.

Contact Phoenix Law For A Free Consultation

To speak with an experienced and caring bankruptcy attorney, call us in Livonia at 734-779-9999 today. You can also schedule your free consultation by completing our contact form. Please include your name and a time you would like to meet. We look forward to helping you make a fresh start.