Daniel C. Cohen is a founding partner of Consumer Attorneys LLP and co-chairs the firm’s Consumer Finance Litigation practice. Mr. Cohen also manages the firm’s client intake and development efforts.
About Chapter 7
Consumers who find themselves swimming in past-due bills may be able to file for Chapter 7 bankruptcy to improve their long-term financial health -- but they should understand the risks involved and determine if they are even eligible to file.
When consumers debts have exceeded their income, they may have the option of filing in a federal court for either Chapter 7 or Chapter 13 bankruptcy, though the route they choose depends on how much they have in the bank, the type of property they own and the income they are pulling in.
Low-income debtors who aren’t holding on to any assets may find Chapter 7 to be their best option to get themselves back on track — it could wipe out certain types of unsecured debt, except for child support obligations, tax bills or student loan payments.
According to numbers collected by the Administrative Office of the US Courts, in the year-long period ending in March 2020, about 62 percent of individuals and businesses in bankruptcy proceedings filed under Chapter 7.
But debtors who file for bankruptcy are subject to a stringent means test to count up their disposable income and their monthly expenses to make sure they qualify. And the bankruptcy could linger on a consumer’s credit report for 10 years, which may hurt their chances of getting new loans down the road.
With help from the attorneys at Consumer Attorneys LLP, consumers may be able to decide if filing for bankruptcy under Chapter 7 is their best option — and if so, they can make sure their clients are taking the best steps to protect their financial security.
Considering Chapter 7
Chapter 7 tends to be the simplest way for consumers to resolve their debts — many are able to resolve their cases in a matter of months and hold on to their property when it’s all over.
Some property is exempt from getting taken in a Chapter 7 proceeding — courts cannot debtors to sell their clothes, their automobiles or their household appliances and furniture, nor can they seize money paid out through public assistance programs.
But courts can force debtors in Chapter 7 proceedings to sell second cars or homes, valuable collections, money in a bank account over a certain amount and stocks and other investments.
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