Chapter 7 Bankruptcy — A Fresh Start and Relief From the Stress
Chapter 7 bankruptcy provides peace of mind and a fresh beginning. It is debt relief and creditor relief provided under federal law for people like you who are in financial trouble with no reasonable hope of ever paying back all of their debt.
Explore Your Options With Louisiana’s Oldest Bankruptcy Law Firm
The experienced bankruptcy lawyers of Simon Fitzgerald LLC, offer a free initial consultation to discuss Chapter 7 and all your debt relief options. Arrange a meeting at one of our offices locations across Louisiana:
Shreveport / Monroe / Bossier City / Alexandria / Lafayette / Lake Charles
What is Chapter 7 Bankruptcy
Chapter 7, also known as liquidation bankruptcy or liquidation, in most cases, allows you to eliminate unsecured debts such as credit card debt, medical bills, and money judgments. Not all debts are eliminated (see What Debts Are Discharged?), but by eliminating thousands — even tens of thousands — of eligible debt, you should be able to get back on financial track. Chapter 7 can also discharge your personal liability on secured debt.
Filing for Chapter 7 forces creditors to stop collection actions and harassing phone calls. In most cases, you will have to continue to pay secured creditors to retain the collateral.
The greatest fear about Chapter 7 is “losing everything.” This is a common myth about bankruptcy. In reality, most of our clients who qualify are able to keep most or all of what they own through the Louisiana bankruptcy exemptions and other federal exemptions. (Some people do have to forfeit nonexempt property or arrange to “buyback” some of those assets from the bankruptcy trustee.)
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How Does Chapter 7 Bankruptcy Work?
Facing bankruptcy can be daunting; however, when you have a highly skilled Chapter 7 bankruptcy attorney from Simon Fitzgerald helping you through the process, you might be surprised at how simple it can be. The whole process may take no more than 80 days or about two and a half months to complete. However, it is possible for there to be delays that lengthen the amount of time it takes to discharge your case.
Steps are taken in a Chapter 7 bankruptcy filing
- Your attorney will run the means test to determine whether you qualify for Chapter 7 bankruptcy.
- Your attorney will petition the bankruptcy court to begin the process if you qualify. A husband and wife may file a joint Chapter 7 bankruptcy or individual petitions.
- You must take a credit counseling class and file the certificate of completion with your bankruptcy petition.
- Along with the petition, a schedule of assets and liabilities, a schedule of current income and expenditures, a statement of financial affairs, tax returns from the past two years, and a schedule of lending contracts will be attached. You must also include a detailed list of all your monthly living expenses, a list of all your property, a list of each creditor (with the amount and nature of the claim), and the source, amount, and frequency of your monthly income.
- Your attorney will determine whether some of your assets can be exempted under Chapter 7 bankruptcy law.
- Once the petition for Chapter 7 bankruptcy is filed, an automatic stay is issued that stops most collection actions.
- The bankruptcy clerk will provide notice of your Chapter 7 bankruptcy filing to all the creditors on the list you provided.
- A trustee will be assigned to your case and will hold a meeting of the creditors. You may also see this as the 341(a) meeting. The trustee will ask you questions under oath about your petition. He or she may ask you to provide additional information, as well. This meeting usually occurs between days 20 and 40.
- After the meeting of creditors, you may have additional documents to turn in. You will need to complete a financial course, which is a requirement for filing for bankruptcy under federal law.
- Commencement of your Chapter 7 bankruptcy case creates an “estate” which becomes the temporary legal owner of all your property.
- A discharge will release you from personal liability for most debts, preventing creditors from taking any collection actions against you. The earliest a discharge can happen is 60 days after your meeting of creditors.
- You will likely begin receiving offers for credit cards—perhaps secured—in the mail once your Chapter 7 bankruptcy has been discharged. Choose a couple of credit cards and use the credit wisely, paying the balance in full each month to begin rebuilding your credit.
What Is the Difference Between Chapter 7 Bankruptcy and Chapter 13 Bankruptcy?
The primary difference between filing for Chapter 7 bankruptcy and Chapter 13 bankruptcy is that the focus of Chapter 7 is to get rid of all your unsecured debt (credit cards, personal loans, and medical bills). In contrast, Chapter 13 puts a repayment plan in place that discharges unsecured debt while allowing you to catch up on past-due house or car payments. Additional differences between Chapter 7 and Chapter 13 include:
- While Chapter 7 looks at your assets from the time your bankruptcy is filed, protecting your exempt assets, then discharging most of your debts, Chapter 13 focuses on repayment of secured debts while discharging or paying less than you owe for unsecured debts.
- Chapter 7 bankruptcy will not allow you to have recent income tax debt, child support, spousal support, or student loans discharged—and neither will Chapter 13. Under Chapter 13, you can make arrangements to pay those debts more affordably, while under Chapter 7, you will have to deal with the debts on your own once your other debts are discharged.
- Under Chapter 7 bankruptcy, if you can no longer afford a secured debt for your home or car, you can give up the house or car, then discharge the remaining debt. You can also continue making regular payments and keep the home and car. If you are behind on your payments under Chapter 7 bankruptcy, your lender may give you a limited amount of time to get your payments current. Under Chapter 13, you can stretch out payment of past due mortgage or car loans over a 3-5-year period.
- Chapter 7 bankruptcy is a more straightforward type of bankruptcy. However, it would help if you meet income limits. Chapter 13 is more complex but gives you more power and flexibility regarding your creditors and nonexempt assets.
For more information regarding the differences between Chapter 7 bankruptcy and Chapter 13 bankruptcy, review our bankruptcy comparison chart or download our free guides.
What Are the Benefits of Filing for Chapter 7 Bankruptcy?
The primary benefit of filing for Chapter 7 bankruptcy over Chapter 13 is the complete discharge of all qualifying debts, offering you a true financial “fresh start.” Without burdens like credit card debt, high-interest loans, medical bills, and certain back taxes, you’ll free up significant disposable income from your monthly paycheck.
If you are being harassed by creditors, Chapter 7 can help you. By law, creditors can no longer contact you after you have filed for bankruptcy. This means any form of harassment will stop, whether it is in person, on the phone, through spam mail, or by regular mail.
Chapter 7 also allows you to keep your future income and doesn’t require a repayment plan. This makes it ideal if you are in a situation where you cannot pay back your debts even on a changed schedule. There’s no limit on how much debt you can have when filing, and the process typically resolves quickly, giving you fast relief from overwhelming financial obligations. For example, if you have recently lost your source of income, it can be impossible to pay back the debts you owe. The larger your debt is, the harder it would be to pay off, even if you readjust your payment plan.
What are the negatives to Chapter 7?
A Chapter 7 bankruptcy will stay on your credit report for longer than a Chapter 13 bankruptcy: 10 years, to be exact. You will also lose access to all of your current credit cards, and it will be very difficult for you to obtain a mortgage in the near future.
Exempt and Nonexempt Property
Under Louisiana bankruptcy law, you are entitled to the following Louisiana bankruptcy exemptions when filing Chapter 7 bankruptcy:
- The homestead exemption is automatically included under Louisiana Chapter 7 bankruptcy. This exemption protects the equity in your home and lands up to $35,000.00 (although this varies according to whether you live in the city or outside of metropolitan zones).
- Under Chapter 7, the motor vehicle exemption allows you to exempt up to $7,500.00 of the value of one vehicle and another $7,500.00 if you have a vehicle equipped to assist a person in your home with a disability.
- Exemptions for benefits include some life insurance benefits, certain insurance payouts issued because of a natural disaster that caused property damage, retirement pensions, and annuity contracts.
- Your wages are exempt at 30 times more than the minimum wage or 75 percent of your disposable income.
- Personal property is exempt mainly, including furniture, musical instruments, household goods, family portraits, kitchen utensils, pets, and other animals, up to $2,500.00 worth of guns and ammunition, and up to $5,000.00 for wedding rings.
- Public assistance is exempt under Chapter 7 bankruptcy, unemployment compensation, COVID-19 relief checks, and any payment to victims of crime.
Nonexempt property under Chapter 7 bankruptcy includes a vacation or second home, a second car (unless you and your spouse are filing jointly), and investments other than retirement accounts.
Chapter 7 Bankruptcy Case Study: Meet Marcey and Steve
Marcy and her husband Steve had a baby, Gracie, almost six months ago. Gracie was born prematurely, with numerous medical issues that required her to remain in the hospital for over four months. As a result, Marcy could not return to her job as planned. The loss of one income, plus the never-ending medical bills, left Marcy and Steve in a precarious financial position. Unfortunately, they are now experiencing harassment by debt collectors. Harassment by debt collectors can take the form of repeated phone calls, texts, emails, or social media messages intended to harass, frighten, and abuse.
When a debt collector uses profane language, threatens you or your family with violence or harm, calls you without telling you their name and the company they are with, or publishes your name on a list of those behind on their payments, creditor harassment is occurring. Creditors are prohibited from using “false, deceptive, or misleading practices.” This means they cannot falsely threaten to have you arrested; they cannot misrepresent the amount you owe on the debt; they cannot claim to be an attorney if they are not, and, in general, they are not allowed to threaten you in any way.
Steve and Marcy are receiving constant calls and texts from debt collectors. At a time when they want nothing more than to enjoy their daughter now that she is finally home, the creditor harassment is quickly turning into a nightmare. While bankruptcy is not something Steve and Marcy ever imagined they would face, they set up a consultation with an attorney from Simon Fitzgerald—LA’s oldest bankruptcy law firm. After discussing their situation (and the creditor harassment) with an attorney, Steve and Marcy now believe that filing for Chapter 7 bankruptcy could be the best way to stop the creditor harassment and get a fresh financial start.
How Do I Choose the Best Chapter 7 Bankruptcy Lawyer in Louisiana?
Choosing the best bankruptcy attorney becomes essential when dealing with a significant financial burden. We know the significance of this judgment and how important it is to regain solid footing through bankruptcy.
When choosing the best bankruptcy lawyer for your Chapter 7 filing, keep the following factors in mind:
Experience
Chapter 7 bankruptcy cases may be complicated, so it’s essential to be sure the attorney you choose has the expertise to handle your particular case. Choose from a firm that has filed a multitude of bankruptcy cases.
Reviews & Reputation
Read online evaluations and recommendations to understand better what it’s like to deal with a particular attorney or legal office. Ask for referrals from dependable friends, family members, or other sources.
Communication
Your lawyer should keep you updated about your case and be available to answer any questions. Check if the attorney’s communication style fits your requirements and expectations.
Accessibility
A lawyer who is available when you need them is crucial. Examine whether the prospective attorney or legal team is responsive and available to speak with you about your situation.
Fee Structure
Be sure to choose an attorney or firm with a transparent fee structure. In an initial consultation, asking about the fee structure and how and when you will pay these fees is essential.
We think the decision will be clear after speaking with a lawyer from Simon Fitzgerald LLC. Our attorneys are committed to protecting our clients’ rights while they deal with an uncertain future. They are empathetic, diligent, and highly experienced.
Do You Qualify? The Chapter 7 Means Test
Federal bankruptcy law changed in 2005 to add an eligibility test based on the median income in each state and other factors. Our attorneys will take a thorough look at your financial picture to determine if you are a candidate for Chapter 7 bankruptcy and advise you on the pluses and minuses of filing.
If your current monthly household income is less than the Louisiana median income for a household of the same size, the presumption is that you pass the means test. “Average” monthly income is determined by averaging your monthly income over the past six months. If your income exceeds the median income in Louisiana, you must complete the means test. This involves calculations regarding your income and expenses. Your income, minus allowed expenses, leaves you with the amount of “disposable income” you have.
A Chapter 13 bankruptcy may be preferable or your only option if:
- You earn too much under the means test
- You are behind on mortgage or vehicle payments on the property you want to keep
- You have nonexempt assets you are not willing to lose
- You prefer to pay a portion of the debt that you can afford
- You want to lower or restructure a vehicle or other secured loans
- You have nondischargeable taxes you would like to pay over time
How Simon Fitzgerald Can Help with Your Chapter 7 Bankruptcy
Ready for a Fresh Start? Simon Fitzgerald LLC is here to guide you.
Understanding Chapter 7 bankruptcy can be easy. Our free guide simplifies it for you. Stay updated with the latest information by signing up for our newsletter. If you’re considering Chapter 7 bankruptcy and need a personalized assessment of your options, we’re here to help.
Don’t let debt control your life. Reach out to Simon Fitzgerald LLC today and take the first step towards financial freedom. Our experienced attorneys are ready to guide you through the Chapter 7 process, ensuring you regain control of your financial future. Call us today to schedule your free consultation at our various offices across Louisiana: Shreveport / Monroe (318-868-2600), Alexandria (318-625-7505), or Lafayette/Lake Charles (337-984-1584). Let us help you embark on a new beginning with Chapter 7 bankruptcy.
