Chapter 7 Bankruptcy

What is Chapter 7 Bankruptcy in New Mexico?

The most common bankruptcy filings are Chapter 7 bankruptcies. In fact, Chapter 7 bankruptcy is what most people associate with the word bankruptcy. This type of bankruptcy is generally used to help the filer (you) obtain relieved from otherwise-insurmountable unsecured debts, such as credit cards or trade debts.

In certain instances, a Chapter 7 can also be used to help a filer gracefully surrender property that is attached to secured debt, such as an underwater home loan or a foreclosure judgment. Chapter 7 is oftentimes referred to as a “straight bankruptcy” because filers of chapter 7 are allowed to keep certain pre-defined assets, known as exempt assets, whereas other assets may be considered to be non-exempt. Non-exempt assets are eligible to be sold by the bankruptcy court trustee in order to distribute the proceeds to creditors.

The experienced bankruptcy attorneys at ABL:Bankruptcy can evaluate your case to determine if you might be at risk for the sale of any non-exempt assets. All of our Chapter 7 cases undergo a thorough analysis and our attorneys assist our clients in the bankruptcy planning and preparation process AND we can proudly state that nearly every one of our clients has safely filed for Chapter 7 bankruptcy without losing any of their assets. We can do the same for you!

Who is a Candidate for Chapter 7 Bankruptcy?

Although Chapter 7 bankruptcy is sometimes used by businesses as part of the wind-up and dissolution process, Chapter 7 was designed for, and is most often used by, individual debtors. But even among individuals, Chapter 7 is not always the best option; Chapter 13 reorganization sometimes provides a better outcome for individuals with a regular income or individuals who have certain types of debts. For individuals with high amounts of debts or high income, an Individual Chapter 11 reorganization may be the best option. It is safe to say, however, that for individual debtors, Chapter 7 is typically the most suitable type of bankruptcy. There are certain qualifications that must be satisfied in order for a filer to be permitted to file for Chapter 7, and it is important for you to discuss these qualifications with the albuquerque bankruptcy attorneys at ABL.

Do You Qualify For Chapter Seven?

There are many preliminary requirements that a filer must satisfy in order to be eligible to file a Chapter 7. Some examples include: residing in New Mexico for at least 180 days prior to the date of filing, income amounts that do not exceed the allowance under the means test, past Chapter 7 filings within eight years, no gifting/giving away valuable property to family members or friends within two years of filing, and not anticipating significant changes in income or assets soon after the filing. Additionally, the U.S. Bankruptcy Code requires filers to disclose all of their monthly income and expenses. In addition to wages earned, debtors must disclose all other sources of income. Debtors who meet all the qualification criteria are presumed to qualify for Chapter 7. Debtors who do not qualify may still be able to file for Chapter 13 of Chapter 11.

There are numerous other qualifications which our bankruptcy specialists will evaluate on your behalf so that you have the peace of mind knowing that the best albuquerque bankruptcy attorneys will be evaluating your case and giving you precise information about your ability to qualify for Chapter 7. After determining whether an individual or business may qualify for Chapter 7, our bankruptcy lawyers may provide you with a risk assessment of your case which outlines the potential roadblocks, risks of filing, and also provides an outline of the case strategy; all of which is prepared specifically for your case. Ultimately. the filer must determine whether the risks associated with filing are outweighed by the potential benefits, but our attorneys will be at your side throughout the evaluation phase and throughout your case making sure you are informed and also making sure you obtain the best outcome possible.

Chapter 7 limitations

There are limitations to the benefits of Chapter 7, for instance, Chapter 7 generally does not provide a discharge of certain types of debts. In most instances, Chapter 7 discharges the following types of debt:

  • Medical bills
  • Unsecured judgments
  • Credit card debts
  • Unsecured loans
  • Unsecured trade debts
  • Secured debts, if property securing debt is also surrendered

On the other hand, the following types of debts are generally not dischargeable and the filer may remain liable for such debts even after their Chapter 7 is completed:

  • Federal student loans
  • Unpaid taxes
  • Tax liens
  • Alimony
  • Child support/spousal support
  • Secured loans such as mortgage and car payments, if the property securing debt is not also surrendered
  • Criminal fines

Because Chapter 7 does not discharge every type of debt, it is important for your bankruptcy attorney to discuss the risks and potential benefits of your case before filing. For instance, if your debt consist mostly of student loans and unpaid taxes, Chapter 7 may not be the best option for you. On the other hand, if your debt consists mostly of credit card debt and medical expenses a Chapter 7 would likely be the best option for you. What sets the lawyers at ABL apart from the rest is that each lawyer will discuss these options with you, provide guidance and analysis, and help you make the best choice.

How Chapter 7 Works

Immediately After You File

When you file for Chapter 7, an automatic stay is immediately issued which prevents creditors from collecting debts and repossessing your property.

A Trustee is Appointed

A trustee is appointed to screen your case for compliance with the bankruptcy rules.

Documentation and Hearings

After filing, our attorneys will prepare your trustee documentation and attend all ordinary hearings with you in order to make you more comfortable and also to ensure that your case proceeds as planned.

How Long Does this Take?

Typically, a Chapter 7 will be completed within ninety days of the date of filing and once the Chapter 7 is complete all of your dischargeable debts will be discharged.

What Assets Can You Keep?

Your evaluation would not be complete without also considering your assets. Some assets are exempt from liquidation, meaning that you can retain them. Non-exempt assets can be subject to liquidation and our bankruptcy attorneys will guide you through the process of determining if any of your assets would be considered non-exempt, and if so, we can negotiate with the trustee and/or the court to allow the filer the opportunity to purchase non-exempt assets so such items are not sold by the trustee. In most instances, the following assets are exempt from liquidation:

  • One automobile
  • A primary place of residence and the equity in the property (subject to limitations)
  • 401K/ retirement accounts
  • Term life insurance policies
  • Personal effects such as household items and clothing
  • Tools used in the trade of the filer

We Understand the First Steps are the Most Difficult

The most important decision that most clients face is actually making the decision to see one of our bankruptcy attorneys in order to file a Chapter 7 or other form of bankruptcy. For most clients, the financial situation they are in came about because of general economic conditions or because of specific events in their lives, such as medical treatment, that have made it extremely difficult for the client to “get back on track.”

With the helpful and experienced bankruptcy attorneys in our office, you don’t have to spend another sleepless night worrying about finances. We can, and will, help you escape the quicksand of insurmountable debt and get you on your way to the fresh start that you are entitled to. If you have questions or would like more information, please don’t hesitate to contact our office to speak with Albuquerque’s best bankruptcy attorneys – we are just a click or a phone call away.

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