Ohio Bankruptcy, Dayton Bankruptcy
bankruptcy attorney in Dayton Ohio

Chapter 7 Bankruptcy

A Complete and Comprehensive Guide for Chapter 7 Bankruptcy

By Dayton Ohio Bankruptcy Attorney and Credit Counselor Richard West

If you need a complete guide for chapter 7 bankruptcy, one that is comprehensive and that provides everything that you need to know on this subject, then you have found what you are looking for. As a Dayton, Ohio bankruptcy attorney with close to 30 years of experience in this legal area I have the information and answers that you need when it comes to chapter 7 bankruptcy. I will give it to you straight, without any double talk, misdirection, or legal speak that only attorneys understand. I have filed for chapter 7 bankruptcy  on behalf of many thousands of clients, but this is not all that I do.

As a certified credit counselor I have also helped many of these clients in their attempts to rebuild credit in a reasonable time after the bankruptcy is discharged, and to improve their credit reports by cleaning up any incorrect or outdated errors. chapter 7 bankruptcy is the first step to a full financial recovery but there is more to it. Rebuilding credit AFTER you have gone through bankruptcy is also part of the financial recovery process, bankruptcy alone will not help you recover and gain the fresh start that you need.

If you are looking for information and answers concerning chapter 7 bankruptcy in Cincinnati, Ohio  or Dayton, Ohio then this comprehensive guide can be immensely helpful. You will find practical advice that you can use, and it is in plain English so that it is easy to understand. In addition I will provide advice and helpful information that most attorneys keep secret and do not disclose to their clients. My goal in creating a comprehensive guide for chapter 7 bankruptcy is to help consumers like you understand what this type of bankruptcy will and will not do, and to help you decide whether this form of bankruptcy is the right tool to use for a full financial recovery and a fresh start.

Is Chapter 7 Bankruptcy the Right Choice for Your Financial and Debt Situation?

In order to determine whether chapter 7 bankruptcy is the best choice for you it is necessary to look at the entire picture as far as your finances and debts are concerned. For a minute don’t worry about things like the chapter 7 bankruptcy means test, charts which show median income, exemptions, and other highly technical parts of the chapter 7 bankruptcy laws and requirements.

Right now there is just one critical question that you need to answer, and your answer will help determine whether chapter 7 bankruptcy is the best choice in your situation. Given your current income and debt levels is it possible to take care of the basic necessities that you and your family need, and is there enough left over to pay off any debts that you have within a reasonable amount of time? Basic necessities include things like food, housing, transportation, and other essentials. So what is reasonable when it comes to the time needed to pay off your debt? A reasonable amount of time for debt repayment is typically considered to be between 3-5 years.

If you can be honest and answer the question above with yes then a chapter 7 bankruptcy is probably not the best move, because implementing spending reductions and an appropriate budget could help you resolve your debts in a reasonable amount of time. If you honestly answer the question with a no then either chapter 7 bankruptcy or another type of bankruptcy proceeding should be considered as a serious option.

Who is a Typical Chapter 7 Bankruptcy Filer?

There is no typical individual who files for chapter 7 bankruptcy. In almost 3 decades of experience as an Ohio bankruptcy attorney I have seen all different income levels, professions, and debt amounts qualify for this type of bankruptcy protection. Some clients had incomes which totaled more than $100,000 a year, others only had a fraction of this amount to get by on. One client made more than $100k annually, but she also had high monthly expenses for child support, alimony, car payments, and housing payments. After all of the required payments were deducted this poor woman did not have much left, and she could not even manage to cover the monthly credit card debt or the medical bills that she owed. After a terrible divorce her finances were devastated and she had little left. This client was granted a chapter 7 bankruptcy discharge by the court without any problems or questions.

A typical filer for a chapter 7 bankruptcy can be almost anyone. Married, single, with or without children, home owners or renters, people who own their vehicles outright and those who must make monthly payments because of vehicle loans. All of these could be included as typical filers for chapter 7 bankruptcy protection. People who use this chapter of the bankruptcy code can have a higher income, but often they also tend to have higher expenses each month and year as well. More expensive car and home payments, out of pocket expenses for medical issues, more credit card debt, and other factors can decimate even higher incomes.

Trying to generalize a typical chapter 7 bankruptcy filer is almost impossible because there are many different situations which could qualify for relief using this type of bankruptcy. In fact from my experience more people should take this route and file for chapter 7 bankruptcy but many do not realize it.

A typical chapter 7 bankruptcy filer can be anyone. I have had clients in the past who used this type of bankruptcy who were doctors, lawyers, and blue collar workers. One previous client was a bank President, another was a sitting judge. I have handled chapter 7 bankruptcy cases for individuals from a wide range of professions and almost all levels of income. No one has immunity from financial difficulties.

Is Chapter 7 Bankruptcy Better than Chapter 13?

There is a common but mistaken belief that filing for chapter 7 bankruptcy is better than filing for chapter 13 bankruptcy. This is not true at all, yet when I advise potential clients interested in chapter 7 bankruptcy that chapter 13 may be a better option many seem disappointed because they believe that this chapter is not as beneficial. I have had people ask if chapter 7 bankruptcy is better than filing under chapter 13, but what they fail to understand is that neither chapter of bankruptcy is any better or any worse. The real question that needs to be answered is which chapter will work best for your specific finances, debts, and needs.

Sometimes chapter 7 bankruptcy can be the best choice, but in some situations this type of bankruptcy case may not be possible. If you have previously filed for bankruptcy protection within the last 8 years then a chapter 7 bankruptcy case will not be allowed even if you meet all of the other requirements under this bankruptcy chapter.

Another situation where chapter 7 bankruptcy may not be appropriate is when property is owned that exceeds what is protected under the current exemptions allowed in the bankruptcy laws. As an example you own your vehicle outright and it is valued far above $5,000. In this situation the exemptions allowed under chapter 7 bankruptcy would not protect the entire value of your vehicle. In this example a chapter 13 bankruptcy may be the best possible choice. Some financial transactions could mean that filing for chapter 7 bankruptcy may not be practical at this point in time.

I have found that there are numerous situations when someone actually qualifies for a chapter 7 bankruptcy but they would actually be better off in the end if they filed for chapter 13 bankruptcy protection instead. Unfortunately many attorneys choose not to file chapter 13 in these situations because the bankruptcy attorney is not comfortable or confident in their ability to handle the additional complications and complexity that a chapter 13 bankruptcy filing can involve. This means that the attorney often recommends a chapter 7 bankruptcy case even if chapter 13 is better for the individual.

When a bankruptcy attorney files for chapter 13 this means that the attorney must be committed to an involvement in the case of 3-5 years, and often the professional does not have the time, resources, or desire to make this type of commitment to their clients. I have had bankruptcy attorneys privately disclose to me in conversations that it is all about the money for them, something that they would never admit to their clients, rather than helping their clients achieve complete financial reorganization and recovery.  These bankruptcy attorneys would rather file chapter 7 bankruptcy for the client and make a fast buck instead of developing a longer term relationship by filing for chapter 13.

I do not believe that this is honest or ethical, and I am the complete opposite of these lawyers just looking to make some fast cash. I want to help you determine which type of bankruptcy is best for you and your financial situation, so that you get a complete financial recovery and the fresh start that bankruptcy is supposed to offer. If a chapter 13 bankruptcy would be better than a chapter 7 bankruptcy in your situation then we will partner together for the full 5 years, or even longer if necessary, so that you get a fresh start and rebuild your credit once the bankruptcy is discharged.

Do You Even Qualify to File a Chapter 7 Bankruptcy?

Many potential clients do some Internet research on chapter 7 bankruptcy before they ever come in to see me, and they are usually just as confused after researching this topic as they were before they started. The world wide web contains a lot of information on bankruptcy that can be confusing, misleading, or even completely false and deceptive depending on the source.

One of the first things these individuals noticed when they started searching was the means test. In order to help explain this test and how it works I have created some videos on the means test which details everything you need to know, and these can be found on my website and on YouTube. These videos even explain what happens if you fail the Means Test, and why this test may not matter much at all in many chapter 7 bankruptcy cases. An experienced chapter 7 bankruptcy attorney who understands the bankruptcy laws can usually handle the debt problems that you have while also ensuring that you pass the means test.

On the other hand qualifying under the chapter 7 bankruptcy code can be a lot more difficult if your equity in any property owned is excessive and you do not want to lose the property. Under chapter 7 bankruptcy your debts can be discharged and you can keep property but only up to specific exemption amounts. The chapter 7 bankruptcy exemption law in the state of Ohio currently allows the filer to keep one vehicle free and clear, as long as the vehicle is not valued at more than $3,675 and it is fully paid for. There are some other exemptions would could be used t increase the amount of equity and the value of the vehicle allowed but if the value is significantly higher than the current exemption amount than a chapter 7 bankruptcy may not be your best choice.

In most chapter 7 bankruptcy cases you may be able to keep one vehicle with a value of up to $5,000. If the value is higher than this then you would normally be expected to pay something during the bankruptcy case if you want to keep the vehicle. In this situation chapter 13 bankruptcy instead of chapter 7 bankruptcy could be the better option. Under no circumstances should you try to put the title to the vehicle in the name of someone else in order to file a chapter 7 bankruptcy case and still keep the vehicle, this is not allowed and is illegal.

Chapter 7 Bankruptcy and the Means Test

The means test relates to your income, more specifically the income that your entire household had. Any income for the household must be listed and considered. If you have an income amount that is sufficient to pay for your necessary living expenses and essentials, plus pay the debts that you owe in a reasonable time, then it may not be possible to qualify  and meet the requirements of a Chapter 7 bankruptcy case. Simply passing the means test is no guarantee that you automatically meet the criteria to qualify for chapter 7 bankruptcy either. The means test is just one of several tests that must be applied before a chapter 7 bankruptcy will be allowed.

Some situations may not even require that the means test is completed for a chapter 7 bankruptcy, but even these cases are not a slam dunk. The court could determine that your income is sufficient to pay ff the debts you owe plus your necessary living expenses, and if this happens you would not qualify for a chapter 7 bankruptcy because of the finding by the court.

Many bankruptcy experts across the country believe that the means test was a law that was very poorly designed, and it can cause confusion or create complications. Some situations could involve failing the means test, which would usually mean filing a chapter 13 bankruptcy instead of a chapter 7, but special circumstances would still allow you to file under chapter 7 of the bankruptcy code. Once the special circumstances are explained to the bankruptcy court if it is determined that you actually can not pay then a chapter 7 bankruptcy discharge could be granted in spite of the fact that the means test was failed or your income was above the median amount allowed.

What Not to Do Before Filing for Chapter 7 Bankruptcy

If you are even considering a chapter 7 bankruptcy filing then there are some things that you should avoid doing in the months leading up to your filing. Do not make any financial transactions which are large or that have a significant impact on your financial situation until you have consulted with a bankruptcy specialist. Another big no no is liquidating any retirement plan that you may have. Avoid transferring any property that you own into someone else’s name, and only make the usual monthly payments to creditors. Do not pay extra on these debts.

Normally purchasing property before you discuss your financial problems with a bankruptcy attorney is not a good idea, but sometimes this can be beneficial before you file for chapter 7 bankruptcy. I have had clients that I advised to purchase a vehicle before they filed because getting the credit necessary for the purchase was easier before the chapter 7 bankruptcy case was filed. In fact thanks to my experience as a Dayton, Ohio bankruptcy attorney for close to 3 decades I even know where my clients should go to get a car so that the process is easier before their chapter 7 bankruptcy case is filed. I offer an extensive list of things that you should never do before you file bankruptcy on my website here.

What Types of Debts are Discharged in Chapter 7 Bankruptcy?

There are many different types of debts which may be discharged in chapter 7 bankruptcy. These can include:

  • Medical Debt


A video which explains how to discharge medical bills during bankruptcy can be found here. Medical bills are one of the biggest reasons consumers have for filing chapter 7 bankruptcy. Many of my clients want to know if discharging medical bills using bankruptcy will prevent them from receiving medical care in the future, and the answer is usually no. A chapter 7 bankruptcy discharge will normally not stop you from seeing your doctor or from receiving treatment from a hospital or emergency room if you need treatment for a medical problem.

Bills from laboratories and hospitals are discharged during chapter 7 bankruptcy cases on a regular basis, and I have never had a client who could not get the treatment that they needed from these organizations. This has been true even when the discharge was for the exact lab or hospital that they want to use now. Emergency rooms will also not refuse treatment to you just because of a past chapter 7 bankruptcy discharge of any debts owed, and usually the ER staff can not even tell that you filed for bankruptcy before.

If you filed chapter 7 bankruptcy and you had debts to a private physician discharged then this could affect your ability to continue to see the physician, depending on the specifics of your situation. If you have a physician and you owe money to the doctor when you file for a chapter 7 bankruptcy then this could make it more difficult for you to continue to see that physician. I advise clients to contact the physician and discuss the issue. When you talk with your doctor about this before you file your bankruptcy petition and you reach an agreement to make payments on any debt that you owe most physicians will continue to keep you as a patient.

It is important to note that a physician does not have to continue to take you as a patient, but many will as long as you are honest with them about what is going on. Any debts owed to a doctor must be included in the chapter 7 bankruptcy petition, no debt is allowed to be excluded even if it is a debt to your doctor. If debts owed to the physician are discharged during the chapter 7 bankruptcy case then the physician can not try to collect this amount, but you can make voluntary payments if you choose to do so. Many of my clients choose this route so that they can keep their physician.

  • Personal Loans and Credit Card Debt


Credit card debt is the most common debt type that is discharged using chapter 7 bankruptcy, and this debt type accounts for a majority of the bankruptcy cases filed each year. Personal loans and loans that re regarded as unsecured debt are also frequently discharged during a chapter 7 bankruptcy. This includes signature loans and other loans where there is no security or collateral. These debts normally do not require any payment before being discharged. Understand that these types of accounts will be closed once a chapter 7 bankruptcy petition is filed, but most people can easily get credit cards so this should not be a problem.

  • Loans That Involve Collateral


Collateral loans are loans that come from financial companies which often include American General, One Main Financial, Beneficial, Household Finance, and Springleaf. These are loans that typically carry a high rate of interest, and when you apply for the loan you must fill out a form listing any personal property that will be used to secure the debt.

Some clients have told me that when they applied for a collateral loan the finance company staff even included property in the listing that the client did not own. In theory if collateral loans are not paid the finance company can take the items listed as security, but the reality can be much different. I have dealt with clients who tried to tun over the items listed as security in order to discharge any debt still owed, and they were surprised to find that the finance company would not accept the return of the property.

  • Title Loans


In the state of Ohio title loans are legal and these are allowed. What does that mean for a chapter 7 bankruptcy filer though? Usually title loans involve outrageous interest rates, and the people who take out these loans are often stuck with the impossible choice of paying for necessary living expenses or paying on a loan so that they do not lose their vehicle. Companies that provide title loans will repossess the vehicle if the loan payments are not made. In my experience this type of loan is one of the most dangerous, and one that I find the most frustrating.

Daily life is often not possible without a vehicle for many people, and being without a vehicle can be an enormous hardship that can just make financial problems even worse. The debt that you owe to the title loan company can be discharged during a chapter 7 bankruptcy, but the discharge will not eliminate the security interest that the company has in the vehicle. This means that if you do not make the required payments the company can take the vehicle and bankruptcy can not protect you from this.

For many clients who have title loans and financial problems I advise them to pay the title loan payments and to skip payment on other types of debt that are dischargeable instead. I also advise my clients to make every possible effort to pay off the title loan before we file for chapter 7 bankruptcy, in order to protect the client and ensure that they keep the vehicle that they desperately need. You may miss a number of monthly credit card payments as a result but you will still have your vehicle and a clear title. This is normally a safe thing to do because credit card companies do not sue right away, and this provides time for you to transfer your available financial resources so that you keep your vehicle once you file for chapter 7 bankruptcy.


If you file for chapter 7 bankruptcy the good news is that any payday loans you have can be discharged. When you take out a payday loan you are required to sign many documents, and some of the information that you are given may make it seem like you can not discharge this type of debt in bankruptcy but that is not true.

The bankruptcy law does have a provision that limits cash advances and payday loans to a maximum of $825 for discharge if the advances were made within a 70 day window before you filed for bankruptcy, but in reality this is not always true either. In all of the cases that I have handled in bankruptcy court I have not had a payday loan creditor request that a debt of this type is paid even if the debt exceeded the maximum.

Payday loan creditors typically require repayment through automatic bank account deductions, and they take the money from the bank account where you have you paycheck deposited. Your repayment is usually timed so that the money is deducted as soon as your pay is deposited, and it is almost impossible to withdraw your money before it is removed in order to repay the payday loan.

Once in a while a payday loan is paid with a post dated check, which the lender holds until the date on the check before depositing. Trying to place a stop payment on the check can be very difficult because these creditors are good at avoiding this possibility and they almost always find a way to get payment in spite of any stop payment you have attempted. Because payday lenders have a lot of experience at collecting they usually end up getting the money that they are after. There is some advice that I offer to clients that can be effective at stopping payments on payday loans before they file, and after filing for chapter 7 bankruptcy these loan payments can stop completely.

Will Chapter 7 Bankruptcy Cost Me My Vehicle?

One of the most common questions I hear in my role as a Dayton, Ohio bankruptcy attorney has to do with vehicles. Without a vehicle getting to work, running errands, paying bills, and taking care of other daily responsibilities can be impossible. Some clients have explained to me that their fear of losing their vehicle was so great that they dd not even consider bankruptcy as an option for years. These clients did not even know whether their vehicle would be taken if they filed for chapter 7 bankruptcy, the fear alone kept them from looking at this possibility.

No one has to lose a vehicle because they file for bankruptcy.

If your vehicle is worth more than the exemptions that you can take during chapter 7 bankruptcy then it may become necessary to file under chapter 13 so that you can retain the vehicle, but even under this chapter debt discharge is still possible. In some cases very little would need to be paid to creditors even under chapter 13.

I file chapter 7 bankruptcy cases at least several times each month that involve individuals who own a vehicle, sometimes even two or three, which are completely paid off. These clients do not typically lose their vehicles during chapter 7 bankruptcy.

There are two categories that vehicles will fall under during chapter 7 bankruptcy: vehicles which are paid off and vehicles that still have debt owed on them. A vehicle which has been fully paid for is considered to have equity in the amount of the current vehicle value. As noted earlier the bankruptcy exemption for this type of property offers protection of up to approximately $5,000 if all of the allowed exemptions are combined.

The blue book value for a vehicle will be used as a starting point to determine the value for bankruptcy purposes, but this is just a starting point. Your specific vehicle may have a value that is higher or lower than what the Kelly Blue Book value shown. In general if the vehicle is worth less than $5,000 when you are using the KBB value for a clean trade then it should b possible for you to keep the vehicle if you file for chapter 7 bankruptcy.

The other category that your vehicle may fall into is a vehicle that is not fully paid off. If you still owe on your vehicle then we will deduct the amount that is still owed and needed to pay off the loan from the vehicle’s value. This will determine the amount of equity that you have. As long as your equity amount is less than $5,000 and your payments are current then chapter 7 bankruptcy should not make you lose your vehicle.

If the value of your vehicle is significantly higher than what I can protect during chapter 7 bankruptcy then we may need to consider filing chapter 13 bankruptcy in order to protect your vehicle.

The protection for your vehicle  is in the form of the bankruptcy exemption that is applied, and it works in the following way:

There is one vehicle exemption allowed for each individual who files a petition for bankruptcy. This exemption offers protection for the interest that the individual has in the vehicle. Married couples who file bankruptcy jointly are entitled to an exemption for each person as long as the title is jointly held. A $10,000 vehicle jointly owned by a married couple would be fully protected in chapter 7 bankruptcy. Since each spouse owns half of the vehicle, and each spouse is entitled to $5,000 in combined exemption, the $10,000 value would be protected. If all of the exemptions allowed are used on the vehicle then it is covered under chapter 7 bankruptcy and fully protected.

What happens if the same married couple owns the $10,000 vehicle with joint title but one spouse has another vehicle as well, and this one is worth $3,800? In this situation the less expensive vehicle could be turned over to the bankruptcy trustee, or the couple could enter into an agreement to pay the value of the $3,800 vehicle to the trustee over a specific time period, usually 6 months on average. This would allow the couple to keep both vehicles.

If neither example above is a possibility then another option would be chapter 13 bankruptcy so that debt can be discharged and you can keep your vehicles. With this option you would pay some to your creditors, but in return you would be able to keep your vehicles which could be a fair trade. There may also be some other benefits that you may get from chapter 13 bankruptcy that we can explore. 

What is Automobile Redemption?

If you owe more money on your vehicle then it is worth then you may be able to take advantage of the redemption process in order to keep your vehicle AND pay less than the debt owed on it. As an example we will say that your vehicle is a 2014 and it is worth approximately $10,000. When you purchased the vehicle you ended up getting fleeced on the trade in amount and the price paid. As a result you owe $20,000 for a vehicle only worth $10,000. I know about special finance companies which provide loans to people in chapter 7 bankruptcy solely for the purpose of vehicle redemption.

One company that does this is 722 Finance. In the example you would get a loan for $10,000 from the special finance company and then give the money to the creditor who is owed $20,000 for the vehicle. The automobile creditor will receive the value of the vehicle, the $10,000, and the remaining balance of $10,000 which exceeds the vehicle value would then be discharged at the end of your bankruptcy case. You now have a new loan, only this one is to 722 Finance, and you only owe the $10,000 that the vehicle is valued at. Because of the special circumstances involved the new loan can have high interest rates, sometimes around 24%, but this option is still better than owing twice what the vehicle is valued at.

Reaffirmation of Debt

Most of the time if you file for chapter 7 bankruptcy and you owe money on a vehicle you will be asked to provide reaffirmation of debt for the creditor. Reaffirmation is a simple process that involved you resigning the documents and affirming that you will keep the loan and continue making payments on the vehicle. Your payment amount and terms does not change, so it is almost like the bankruptcy did not happen to this specific creditor. It is very common for reaffirmation of debt to occur during chapter 7 bankruptcy cases when vehicles are kept by the individual.

Purchasing a Vehicle After, or Even Before, Bankruptcy

At times you now even before you get ready to file for bankruptcy that you do not want to keep the vehicle that you have. You do not plan on reaffirming this debt and you are not interested in redemption. You want to give the vehicle back to the creditor and then ash your hands of the while mess. Maybe the vehicle has high miles, maybe it is in bad condition, or there may be other reasons why you no longer want the vehicle. Your vehicle debt probably exceeds what it is worth anyway.

You need a vehicle though, and if you return the one you have then you need to consider whether it would be better for you to purchase a new vehicle before you file bankruptcy or after. No two situations are identical, but I have found that it is usually better for clients to purchase a vehicle before they file their chapter 7 bankruptcy case.

Before you file a chapter 7 bankruptcy case it is typically easier to get financed for a vehicle purchase. This is true even if your credit score is poor. Once you file for chapter 7 bankruptcy some creditors will not even consider you for a loan for months after your discharge is final, and you could find yourself without a vehicle during this time. For this reason I usually advise clients to purchase a vehicle before they file for their chapter 7 bankruptcy.

In this situation you would make the vehicle purchase before you file chapter 7 bankruptcy. During the bankruptcy you will reaffirm the debt on the new vehicle, and surrender the vehicle you no longer want back to the creditor as part of your bankruptcy case. The creditor will auction off the vehicle in order to try and recover some of the debt owed, but they can not try to recover any unpaid debt balance from you.

What Happens to My Apartment Lease When I File Chapter 7 Bankruptcy?

There is no need to be concerned that filing chapter 7 bankruptcy will cost you the lease on your apartment. The apartment complex that you reside in may ask you to reaffirm the current lease but usually even this is not necessary. As long as you continue making your lease payments everything goes on like normal.

You will need to list the apartment lease in your chapter 7 bankruptcy petition because this is a debt that is owed and every debt must be listed for the court. In the petition for chapter 7 bankruptcy we will explain that you intend to keep the lease and continue to make the payments when they are due. If your payments are not made in a timely manner then you could end up being evicted from the apartment just like an individual who is not in bankruptcy proceedings. The fact that you filed for bankruptcy won’t cause your eviction though, as long as you keep your rent payments current.

Sometimes you could be better off if you break your current apartment lease and move to another residence instead. You may have suffered a financial setback, the loss of a job, or even a divorce or the death of a spouse. If you have a lease that you can not afford any more then chapter 7 bankruptcy can help. You can break your lease, move to more affordable lodgings, and still discharge any lease payments left through bankruptcy. This can even eliminate any damage claims that may be made against you by the landlord.

The best way to handle this type of situation is to move out of the apartment before you file for chapter 7 bankruptcy. After you have moved out we will include any debt associated with the lease in the bankruptcy case to be discharged.

A big source of concern from renters who are thinking about chapter 7 bankruptcy is whether it will be possible to rent another apartment or residence in the future after filing bankruptcy. I have found that this is not normally a problem, and in the many thousands of cases I have filed over the years I have very rarely had a client tell me that their chapter 7 bankruptcy made it hard for them to find a place to live.

As a matter of fact filing for chapter 7 bankruptcy could actually make you a better prospect for potential landlords. All of your debt is gone so the landlord knows there are no creditors waiting in the wings to try and grab part of your income. This means that you will have the cash available to make your rent payments on time each month.

Can You Keep Your Home With Chapter 7 Bankruptcy?

A large percentage of the clients who I file chapter 7 bankruptcy for are home owners, and they are in the process of purchasing their home with a mortgage. These clients do not have to give up their homes as part of their chapter 7 bankruptcy.

In Ohio the exemption for equity in a personal residence is $132,000, per individual. A couple who is married and who jointly own a residence may protect approximately $264,000 and still use chapter 7 bankruptcy. Some of my clients are older couples who have worked very hard and sacrificed to pay off their mortgage debt. These couples really need the help that chapter 7 bankruptcy can provide but they do not want to give up the real estate that is their home. Even 10 years ago there was cause for concern because Ohio only allowed a residential real estate exemption of $5,000 per individual at the time. This is no longer an issue for most people though because the exemptions have changed.

Today home values have plummeted though, and it is common for people to find that they have little or even no equity left in the property. I advise these clients to consider letting their home go during the chapter 7 bankruptcy, or at the very least refusing to reaffirm the debt, so that it is possible to walk away later on if this becomes necessary.

Home mortgages are unlike vehicle loans because mortgages are very rarely reaffirmed during chapter 7 bankruptcy. Mortgage debt reaffirmation is not a standard practice, and even the lenders do not typically ask for this step. Failing to reaffirm the mortgage does not mean you will lose the home that you live in. As long as the mortgage payments are made in a timely manner each month then your chapter 7 bankruptcy should not affect your home, and things will continue almost like the bankruptcy did not occur.

Almost Means There is a Difference Though

Filing for chapter 7 bankruptcy and not affirming the mortgage that you have means that the debt attached to the mortgage will be discharged as part of your chapter 7 bankruptcy case. The mortgage lien is still attached to the property though, and that means that if you want to own the home free and clear you will still need to pay off the mortgage in order to gain title. You do not have a legal obligation to pay the debt for the mortgage, but if you stop making payments the mortgage lender will foreclose and take possession of the property.

In a process called pay and stay you may choose to continue making the monthly payment on the mortgage. If you make the payments until the mortgage is paid in full then the mortgage lien would be released and you will have clear title to your home. It Is also possible for you to sell your property, use the money to pay the mortgage debt in full, and provide a clear deed to the home buyer. If you make any profit off of the sale this is yours to keep.

If you do not reaffirm the mortgage debt owed the payments that you make will not be reported on your credit report by the lender. The position of the bank in this situation is that the debt was discharged so you no longer owe it, so there is no reason to report your payments to the credit bureau. The negative potential that you face is that your payments are not reflected on your credit report, but there are also benefits. One big advantage is that there is no debt reported by the bank because you no longer owe the debt. The up side to this is that your debt to income ration will improve significantly.

In this situation chapter 7 bankruptcy can offer the opportunity to simply leave the home and walk away, even as far as years in the future. Even if the mortgage lender starts foreclosure and takes the property back the debt was discharged in the chapter 7 bankruptcy and the homeowner will not owe anything. The benefits of not reaffirming the mortgage debt usually far outweigh the negative of payments not being reported to the credit bureaus.

Chapter 7 Bankruptcy and Land Contracts

What if you have a land contract instead of  mortgage, or if you are selling a property on land contract terms? How will chapter 7 bankruptcy affect you? If you have a land contract for a home purchase and you are the buyer then you have an interest in the property, a real estate interest. This real estate interest would be covered under the exemption for residential real estate for chapter 7 bankruptcy.

If you are selling on a land contract then under the law you do not have the ability to use a residential real estate exemption, and any equity that you may have in the property would not usually be protected under chapter 7 bankruptcy. When there is a land contract for the sale of the property this means that you would be entitled to payments on the contract, and these payments could be lost if you file for chapter 7 bankruptcy. That is why this should be discussed with an experienced bankruptcy specialist before you decide to file for chapter 7 bankruptcy.

There is no residence exemption under chapter 7 bankruptcy for rental real estate! If you have any equity in rental real estate or business real estate then chapter 7 bankruptcy will not offer you any protection for this equity. In this situation a chapter 13 bankruptcy filing would probably be a better choice.

What About Debts to Credit Unions?

Credit unions are a special situation under chapter 7 bankruptcy. These organizations are typically easy to work with and they may offer loans when other creditors will not. It is possible to use a credit union to get a vehicle loan, a mortgage, and even personal loans and credit cards. For many families a credit union is the only banking or financial institution used.

Chapter 7 bankruptcy can be a little more difficult when you owe debts to a credit union because of a legal concept termed cross collateralization. This concept covers a practice used by credit unions which will tie all debts and collateral together. If you owe a vehicle loan, credit card payments, and a personal loan to the credit union then all of the loans that the institution holds are pretty much secured by the vehicle used as collateral for the vehicle loan.

What this means is if you miss a payment on the personal loan or the credit card account through the credit union then the credit union may repossess the vehicle that your auto loan is based on as a result. When this occurs the member is usually caught completely off guard, upset and irate and not sure of what happened. The credit union member can not understand why their vehicle is repossessed and their bank account has been cleaned out.

It is usually at this point that the credit union tells the member that their personal loan, credit cards, and other debts with the institution are all secured by the vehicle as collateral. When any of these payments are missed the credit union has the legal right to repossess the vehicle, and even to take the past due payments directly out of your account funds. Many credit unions will take all of these actions simultaneously, and you end up with checks that bounce, insufficient funds charges, and fees or the repossession of your vehicle. This is not how you want to learn about cross collateralization.

This little understood legal concept can create havoc for a chapter 7 bankruptcy case. You typically want to keep the vehicle and reaffirm the debt on this loan during chapter 7 bankruptcy, but you are hoping to discharge the personal loan and credit card debt that is not secured. Most credit unions will not accept this arrangement, and in order to keep the vehicle you will normally have to agree to pay off the credit card debt and personal loan balances as well as the auto loan. In many cases the total accumulated debt for the personal loans and credit cards could be more than the vehicle is actually worth right now.

We can not force a credit union creditor to allow debt reaffirmation that only covers the vehicle when we file your chapter 7 bankruptcy case. Instead we normally give the vehicle back to the creditor and then discharge any debt after the vehicle repossession and sale is finished, with no further payments owed by you.

If you find yourself in this situation the best move is to replace the vehicle before your chapter 7 bankruptcy is filed, and surrender the vehicle with the credit union loan back to the creditor. This will help you avoid any issues  during your bankruptcy case. A second option when the situation involves cross collateralization is to file your case under a chapter 13 bankruptcy instead of using chapter 7 bankruptcy. You will find an ultimate guide for chapter 13 bankruptcy in another location on the website.

What Happens to Cosigners If I File Chapter 7 Bankruptcy?

Chapter 7 bankruptcy will protect you but any cosigners, typically close friends and family members, do not receive any protection at all when you file for this type of bankruptcy. You no longer owe any discharged debt but your cosigners will still be on the hook for the entire debt that is owed. If you reaffirm the debt then this does not apply because you will continue to be responsible.

If your sister cosigned for your vehicle loan and you reaffirm this debt during chapter 7 bankruptcy then your sister will not be placed at risk.

If you do not affirm this debt then your sister will owe anything left on the debt it after your responsibility is discharged by the bankruptcy court.

A chapter 7 bankruptcy petition filed with the court must include all cosigners on any of the debts that you have, and these cosigners will receive a notice from the bankruptcy court about your case.  If you have anyone who is a cosigner for any of your debts then it may be a good idea to discuss the fact that you are filing for chapter 7 bankruptcy with the cosigner before you take this step. If the cosigner only finds out about your bankruptcy because they receive a notice from the court this can lead to a problem in your relationship with the cosigner.

Can Utilities be Discharged Through Chapter 7 Bankruptcy?

It is possible to discharge any past due utilities that you owe using chapter 7 bankruptcy. Utility bills are considered unsecured debts, and as such these can be discharged the same way that your credit card debt and medical bills are. After you discharge utilities the utility company can require that you put up a security deposit just like they do for new customers. If the utility already has a security deposit on your account when you file chapter 7 bankruptcy then this deposit may be kept by the utility company in order to lower the total amount that you owe when you filed your bankruptcy petition.

In some cases you may not be behind on your utility payments but any unpaid balance owed when the bankruptcy is filed may still be discharged by the utility company. This does not always happen, but it is technically the correct procedure by the utility company. As an example if your electric bill is not even due until the 30th of the month and your chapter 7 bankruptcy petition is filed on the 15th of that month then any charges due up until the 15th would be dischargeable under the bankruptcy laws. It is possible that this amount is discharged by the utility company even if it is not listed in the bankruptcy petition as a debt owed.

Chapter 7 Bankruptcy and Student Loan Debt

In general student loan debt can not be discharged through bankruptcy, regardless of whether the student loan is a federal product or a private student loan. There are some exceptions though, and it is theoretically possible to have student loans discharged in bankruptcy but in reality this can be extremely difficult.

In order to have student loans discharged during chapter 7 bankruptcy it is necessary to show that paying even a portion of this debt is not possible and will not be possible at any time in the foreseeable future. I explain to my clients that if it is possible for them to walk into bankruptcy court to argue that the student loan debt should be discharged then the argument has already been lost because you could  walk into bankruptcy court to argue your case.

The government guarantees student loans, and that means that in order to have your student loans discharged you must sue the government of the United Stated of America. Successfully doing this is very rare. As a bankruptcy attorney I do not take cases that involve the bankruptcy discharge of student loans because these cases have a very tiny success rate and the cost for my client can be a waste of money. If it truly is impossible for you to pay student loans and you are currently disabled in some way it may be possible to get forgiveness for your student loans without filing for bankruptcy.

One time a woman came to my law firm and I accepted her case even though she had considerable student loan debt, and I was willing to fight tirelessly to help her get the financial relief she needed. I became involved because this woman did not walk in to see me, she arrived in a wheelchair and she was on oxygen during our meeting. I thought there was a high possibility that I could win her case for her, but I never found out because it never went that far. The result was that the student loan debt was discharged after we demonstrated that the woman was actually disabled, and after meeting with the student loan creditor there was no need for us to file a chapter 7 bankruptcy case on her behalf.

Instead of using the bankruptcy courts to address student loan debt it is usually better to work through the student loan process instead. There are several options available when Federal student loans are involved, including repayment based on your income and loan forgiveness programs.

The student loan relief options listed above do not apply to private student loans though, and these can be incredibly difficult to resolve. Private student loans can not be discharged during bankruptcy and the private creditors realize this. These creditors will sue at the drop of a hat and they enjoy being difficult.

It may be necessary for us to file a chapter 13 bankruptcy petition just to protect you from private student loan creditors, because this will give protection for between 3 and 5 years. During this time your income may go up and other debts may be discharged. Hopefully this combination means that you reach a position that allows you to make payments to the private student loan creditor.

What About Rent to Own Debt Owed?

If you have rent to own debt this can be discharged using bankruptcy, either a chapter 7 bankruptcy case or a chapter 13 bankruptcy case. It is important to note that the contracts used by rent to own companies typically require that you return any property to the creditor if your debt will be discharged in bankruptcy. In almost every case I advise clients not to reaffirm rent to own debt or keeping the property and continuing to make payments because the consumer deals offered by these companies are usually overpriced and a bad deal all around.

Every great once in a while I do have someone who is very close to paying off their contract for rent to own merchandise, and in this situation returning the property to the creditor when it is almost fully paid for would be a mistake. In these rare circumstances I advise the client to keep making the rent to own contract payments until the account is paid off and keep the property .

Will Bankruptcy Cost Me My Tax Refund?

Chapter 7 bankruptcy does offer limited protection when it comes to tax refunds, but this protection is usually quite small. In general $800 of any tax refund can be kept but even this is a big oversimplification and does not really answer the question. The date that you file your chapter 7 bankruptcy case will determine how much of your tax refund you will get to keep. The important date here is the date of your bankruptcy filing, not the date that the income tax refund is received by you.

As an example say you file your chapter 7 bankruptcy petition on June 30th and this is the halfway point in the year. Most bankruptcy cases will usually take roughly 5 months from case filing to discharge. This means you would be done with the bankruptcy court sometime around November or December of the year. In spite of this you may be surprised to find that your bankruptcy trustee wants to take away around half of the refund that you will receive, even though the refund will not arrive until the next year and by this time your chapter 7 bankruptcy should be finished. The date that the refund is received does not matter though, it is the filing date for your bankruptcy case that determines how your income taxes are impacted.

Because your bankruptcy case was filed halfway through the year on June 30 the bankruptcy trustee can take half your tax refund as part of your bankruptcy case, even though this refund will not be received until the following year. Suppose your tax refund was for $5,000. Out of this $2,500 will be a part of your bankruptcy case, half of your tax refund. Because you can only keep $800 of the refund that is part of your bankruptcy case then this means that $1,700 out of the $2,500 would usually be kept by the bankruptcy trustee.

Analyzing tax refunds for chapter 7 bankruptcy  can be very complex. Another factor that needs to be considered is that some of the tax return for the individual may not be claimed by the bankruptcy trustee. In the example above with a $5,000 tax refund if $3,000 was due to the earned income credit then this would change everything. Now we must subtract the $3,000 from the earned income credit from the $5,000 amount, leaving an amount of $2,000 that must be claimed. Because the bankruptcy case was filed halfway through the year the bankruptcy court can only keep half of the $2,000 left, bringing the amount subject to loss at only $1,000.

Out of this $1,000 that the bankruptcy trustee can now take you may be able to use an exemption in the amount of $800, lowering the possible loss you may face to just $200 out of a $5,000 income tax refund. Since the amount is so small it is doubtful the bankruptcy trustee would go to a lot of trouble just to collect the $200 that could be taken  This example is just one example, and the bankruptcy laws include numerous other rules and exceptions which apply to income tax refunds and other tax matters.

Tax withholding analysis is something that I typically do for clients that I take on, so that I can help the with a full financial recovery. In the example laid out above I would quickly notice that a $5,000 income tax refund was involved and discuss this with the client. I would show the client that $5,000 is equal to $416 every single month of the year, and that this means the tax withholding by the client is excessive by this same amount every month. I would then ask if the client thought it might be a better idea to receive the $416 in their pay each month instead.

Many people feel that withholding too much in income taxes is a way to save money, or to use any income tax refund for a vacation or paying off some bills. When you file for chapter 7 bankruptcy then any income tax refund is subject to being taken by the trustee according to the bankruptcy laws. Because of this I would advise a client in this situation to change the number of withholding exemptions that they have, so that the amount of taxes which are taken from their check each week is lowered. This step will also decrease the amount of the income tax refund received when the year is over. It is possible for us to make adjustments until there is zero possibility that there will be anything available that the bankruptcy trustee can try to take from you.

Will Filing for Chapter 7 Bankruptcy Cause Me to Lose Everything?

Many people today understand that filing for chapter 7 bankruptcy does not mean the loss of everything that you have. Most people do not clearly understand what property they can keep but they are pretty sure that they will not lose all of their worldly possessions. The real fact is that in most chapter 7 bankruptcy cases most of my clients do not lose any property at all.

One reason for this is that there is an equity exemption in the amount of $10,000 per person that is allowed for furnishings and household goods. How does this actually work though? Imagine that you took all of the furnishings and household goods from inside your home and set them in the yard for a big yard sale. When the day ends there will be two truths evident:

There will not be $10,000 from the yard sale in your pocket, and your yard will still have plenty of items in it.

Most of the furnishings and household goods that people own do not have a high resale value, or even any resale value at all. Because your property is used it has a significantly lower value than the item purchased brand new. The test which must be passed for bankruptcy is not whether you could replace your items for $10,000, because you probably couldn’t. The real test is whether these items are worth more than the $10,000 exemption in the condition that they are currently in after being used. Because of this most if not all of your belongings should be protected when you file a chapter 7 bankruptcy.

There are some types of property that chapter 7 bankruptcy does not offer protection for. Stocks and bonds are typically not protected property if you file for bankruptcy. This can be problematic for people who have employee stocks but are otherwise a good candidate for a chapter 7 bankruptcy. When the value of the stock is assessed the individual may find that their stock in the company account has a current value of $20,000, and filing for chapter 7 bankruptcy could risk the loss of this stock. Because of this factor we must find a different solution instead so the individual does not lose their employee stock.

Another problematic area with chapter 7 bankruptcy can be estate planning when this planning places the real estate owned by parents int an adult child’s name. It is common for parents to put title to their real estate in the names of their child so that there are no probate issues when the parents pass away. Usually the parents who transferred the title to the child still reside in the property, which is often paid for, but the title is deeded in the name of the child. The property in question is not the residence of the adult child so there is no equity exemption available. Any equity in this property would not be protected from the bankruptcy trustee if the adult child files for chapter 7 bankruptcy.

The situation above is one that is quite common, and there is no easy solution. It isn’t possible for the child to simply transfer the deed for the property back to the parents because this can not be safely done within a specific period before filing for chapter 7 bankruptcy. This is one of the big no nos to avoid before you file for bankruptcy. In order to deal with this type of situation, which is always difficult, you will need to do some extensive planning so that you get the best possible results.

There are some steps that can be taken so that property which would normally be lost can be retained during bankruptcy. This process is exemption planning, and it is allowed and even appropriate to engage in this process. I honestly believe that if a bankruptcy attorney is not experienced in exemption planning then the attorney has no business handling bankruptcy cases for clients.

Exemption planning involves the conversion of assets which could be lost during a chapter 7 bankruptcy case into protected assets under the bankruptcy law so that these assets are not lost. As an example we will pretend that you are a married couple who have $10,000 between cash and your bank account balance, and you plan on filing for chapter 7 bankruptcy. One move, depending on factors that include client age and the current time of the year, would be to use the $10,000 to buy private IRAs. This can be very effective when it is done towards years end. Both spouses can maximize their allowable contributions with the private IRA purchases in December, and then do this again at the end of the next year as well. The cash and bank balance funds would be lost in chapter 7 bankruptcy. By converting these assets into IRAs that are protected the money is not lost during the bankruptcy, and the couple just saved $10,000 because of proper exemption planning.

Chapter 7 Bankruptcy Offers Full Protection for Most Retirement Accounts

Under the bankruptcy laws most retirement accounts are completely protected and can not be lost during a chapter 7 bankruptcy. This is not true in every single case though, there are some important exceptions. Many retirement accounts are offered through an employer and this type is typically protected in almost every case. Once in a while I do come across retirement accounts which are not given protection in chapter 7 bankruptcy though. What I have found is that these unprotected accounts are only retirement accounts in name and they do not really meet this definition.

As an example an investment into a specific mutual fund with the intention of using the proceeds for retirement when you get older may make the mutual fund a retirement account in your mind but it may not meet the definition of this type of account under the chapter 7 bankruptcy laws and as a result it may not be protected. Another factor is whether the retirement account was inherited. A recent court ruling found that inherited retirement accounts are not always protected in bankruptcy.

Am I Required to Attend Bankruptcy Hearings or Go to Court When A Chapter 7 Bankruptcy is Filed?

In most chapter 7 bankruptcy cases you will not need to attend a bankruptcy court hearing. Usually there are bankruptcy meetings, and these take place with the trustee instead of the bankruptcy judge and they are held in a normal meeting room most of the time. The reality that I can not stress enough is that the hearing is inconsequential.

Once the hearing stage is reached any problems that you have are probably past the point of being fixed. In fact until the hearing occurs you probably will not have a clue that there is a problem in the first place. Proper preparation and accurate work must be done before any hearing can even take place.

A 341 meeting surprise is something that no one wants. Unfortunately I see this frequently. In fact not long ago I was in bankruptcy court and I was unable to look away as the trustee for the case questioned an attorney about a personal injury settlement that the bankruptcy petition for the attorney’s client had listed.

In that case the attorney was not fully prepared because he did not get all of the facts necessary from his client. The client was not trying to be dishonest and thought that he told the entire story when he explained to his attorney that the account was from a settlement for personal injury. Because the attorney did not question the account further it was unknown that the account in question was from a personal injury but the injury was suffered by the client;s mother who had passed away, leaving her son to inherit the account.

Usually awards for personal injury are protected in chapter 7 bankruptcy by an exemption of $20,000 maximum. Because the award was inherited and it was not due to the client’s personal injury there was no exemption to offer protection. The lack of complete details on the part of the attorney cost his client the funds in the account when the bankruptcy trustee took the money. I did not see what happened next or how the case turned out but I can bet that the relationship between that attorney and his client was very tense afterward.

There is a very important point to this story. I maintain numerous checklists that cover a wide range of different items. All of our cases are checked, double checked, and then checked once more. This helps us ensure that we fully understand every little detail involved in your case and that we fully recognize your unique situation. Only then can we help make sure that our client is protected as much as possible and the best outcome from the chapter 7 bankruptcy is achieved. There are some that would say we go too far, but there is no such thing as being too prepared when the consequences can be devastating to our client.

Anyone who is considering chapter 7 bankruptcy needs to choose a bankruptcy attorney very carefully. If there are any problems that exist after the bankruptcy petition is filed then these may not be repairable or reversible. At this point the damage has already been done. You can not change your mind and just back out just because you learn that a chapter 7 bankruptcy case means you lose property, at this point you are stuck.

You need a true financial recovery, and a fresh start that is real. A successful outcome is imperative and financial reorganization is sorely needed. Why take a chance? Bankruptcy is a very complicated subject and it is a specialty legal area. Any attorney you choose needs to be a board certified specialist in bankruptcy. You would not go to a math teacher to have complicated business tax returns completed or visit a family physician if you need your appendix removed. The same is true with bankruptcy. If the attorney is not a board certified specialist then they are not the right attorney for your chapter 7 bankruptcy case.

Getting Credit and a True Fresh Start After Your Chapter 7 Bankruptcy is Complete

Bankruptcy is supposed to offer a fresh financial start, and it can but you need to remember that this is just a beginning and it is important that you finish what you have started by filing bankruptcy. A chapter 7 bankruptcy alone is not enough to get you back on your feet and improve your credit. Most bankruptcy attorneys are finished once your bankruptcy case is complete and your debts are discharged. In fact as far as I know there is not another bankruptcy attorney in the state of Ohio who offers a formal credit report correction and credit rebuilding program like I do.

I am the only Ohio bankruptcy attorney who has been certified as a credit counselor and a debt arbitrator, as well as being board certified as a bankruptcy specialist which is a designation that the Ohio Supreme Court recognizes. All of these designations mean that filing bankruptcy is just part of what I do for clients, I also assist them so that they rebuild their credit and truly recover financially.

This is something that law school does not teach attorneys in class unfortunately.

One concern that you may have is the belief that bankruptcy will show up on your credit report for up to 10 years after you file and that this can ruin your credit as a result. This can be the case if you fail to take steps after chapter 7 bankruptcy to ensure that your credit report is current and accurate and to improve the credit score that you have. In this situation your credit cold stay poor for an extended time, but this does not have to be the case and you can change this outcome to something better.

In my experience it is best to follow a specific plan after you have filed for chapter 7 bankruptcy. When this is done my clients typically see a credit score which can be 650 or even higher, their credit report is clean and completely accurate, and within a few years of filing for bankruptcy and receiving a discharge they may qualify for a vehicle loan or even a home mortgage without having to pay high interest rates. This requires some effort though, it does not just happen.

Your Credit Report After Bankruptcy

Many consumers do not realize that around $1 billion in debt each year that has actually been discharged during bankruptcy proceedings is paid for again by individual consumers. Often creditors do not update credit report data once you have filed a chapter 7 bankruptcy petition. This puts you in the position of not actually owing the debt but having the discharged debts show as valid on your credit report just like you really do owe the debt.

The position that many creditors take is that they have not done anything wrong because they are not reporting that the debt is still owed, in fact they actually stopped reporting anything at all. In this case it is possible to make the creditors go back and clean up your credit report without a lot of effort. This involves properly disputing any incorrect or inaccurate credit report entries. I have included this dispute method in my legal practice in order to help clients recover after chapter 7 bankruptcy.

There are some individuals who seek out credit repair companies, firms with names like Bradley Allen or Lexington Law. These people hope that the credit repair firm can improve their credit report once their bankruptcy is finished and boost their credit score without any effort. I can not discuss the success rate that credit repair firms have because I have no personal experience in this area but I have had clients in the past who used firms like this and they did not have a lot of success. From what I understand these credit repair firms tend to use an approach which tries to dispute every item on a credit report hoping that this will bring about success, but this is not usually the best method.

Instead of using brute force I have found that a scalpel approach tends to work best. This requires an individual analysis of every thing that is listed on the credit report, and then disputing only the items which are incorrect AND which hurt my client. Some credit report errors may actually help your credit score rather than harming this number. Disputing everything takes a lot less time and does not require an individual analysis of each listing, but this could eliminate mistakes which are favorable to you as well as any harmful errors. Taking the time needed to do it the right way will give much better results.

How Long Does a Bankruptcy Recovery Actually Take?

The time needed for a full recovery after chapter 7 bankruptcy will depend on which approach you take once your debts have been discharged. I have some clients who state their intention to follow a lifestyle that uses cash only. This idea can seem attractive but the truth is that this is not a good idea if the goal is to improve your credit as quickly as possible.

With the proper use of credit you will increase your credit score, but if you try to get too much credit too soon this could harm your credit score instead of helping it. The right approach is necessary to get the best results and the full financial recovery that you need.

I can show you the right way to improve your credit, and when you understand my approach and follow it exactly your bankruptcy recovery should not take much more than a year or so. At this point an auto loan with a decent rate of interest should be possible as long as you have stuck to the plan. It will usually take 3-4 years and then you should be ready to qualify for a mortgage to purchase a home as long as you meet the income requirements. Bankruptcy should not prevent you from doing this.


Chapter 7 bankruptcy can be a financial reorganization tool, one that can be quite powerful when used properly. Approximately 60%-70% of the cases that I handle are chapter 7 bankruptcy cases. Just because you meet the criteria to file chapter 7 bankruptcy this does not that this is the right solution every time. Chapter 13 bankruptcy can give you greater flexibility, additional choices and options, and a much better outcome than a chapter 7 bankruptcy at times.

The information that can be found on the web when you search chapter 7 bankruptcy is usually not a lot of help,and at times it can even be deceptive or misleading. Chapter 7 bankruptcy is a very complex subject and it is not possible to accurately determine the proper application of information just by using the Internet and doing some research. If you want a great outcome you have to talk with an experienced and certified bankruptcy specialist who has almost three decades of solving financial problems just like the ones that you need to solve.

You can spend hours, days, or even weeks trying to understand the means test, being concerned about the median income amount, and searching for exemptions that the bankruptcy law offers. This I snot really a waste of your time but it is not really productive either and won;t help you get the answers that you are looking for.

I have experience successfully filing chapter 7 bankruptcy even when a client does not pass the means test or they have an income that is above the median for their area. I can tell very quickly whether an individual whose income is below median and who may not even be required to attempt the means test  will not be approved to file chapter 7 bankruptcy and why this is the case. 

It is a sad fact that I see all the time that people have bankruptcy cases dismissed over even small errors. The time and money that was wasted on bankruptcy filing fees and on courses for credit counseling when this happens can be substantial, and this is due to the lack of knowledge and experience on the part of the bankruptcy attorney chosen.

A successful chapter 7 bankruptcy filing is not a matter that is simple or easy, and as noted earlier bankruptcy by itself does not offer a full financial recovery. This step is just one part of a larger process that must include the correction of credit reports and efforts on rebuilding credit once a bankruptcy case is discharged.

If you are considering a chapter 7 bankruptcy then this usually means that bankruptcy of some type is the right step but the chapter 7 bankruptcy option might not be the best move you can make. In some cases filing under chapter 7 of the bankruptcy laws can create a lot of stress and cause you to lose property. If this type of bankruptcy is right for your financial situation it can be a highly effective tool though, one which can help you get rid of debt, create a balanced budget, and start a true financial recovery which will take less time than you may imagine.

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