Chapter 7 Bankruptcy Lawyers in Hawaii

How Does Chapter 7 Bankruptcy Work?

When you file for Chapter 7 (also known as "straight" bankruptcy") you are requesting that the court settle your debts by liquidating assets to repay the debt while also discharging a large portion of it.

Here is how Chapter 7 bankruptcy works:

• Eligibility: Not everyone will qualify for Chapter 7. You will need to pass the Means Test, which shows whether your income is lower than the state's median for your household.
• Trustee: A bankruptcy trustee will be appointed. The trustee collects all non-exempt assets of the debtor, sells those assets, and distributes the proceeds to creditors.
• Minimum debt: There is no minimum or maximum debt limitation for Chapter 7 and the debtor doesn’t have to be insolvent.
• Discharge: The goal of an individual debtor in a Chapter 7 case is to get a “discharge” of their debts. In other words, bankruptcy is a tool that can help you get your life back from creditors.

What you don’t want to do is spend too much time waiting to actually apply for bankruptcy. The longer you wait, the deeper your debts will grow. If you are on the verge of losing absolutely everything to your debt, then you should consider seeking out guidance from a seasoned lawyer at Blake Goodman, PC, Attorney to help you through it.

What Is An “Automatic Stay”?

The automatic stay is a feature of bankruptcy law that goes into effect immediately upon filing a petition.

This forces creditors to stop all collection actions against the debtor, including:

• Foreclosures
• Repossessions
• Garnishments
• Evictions

During this process, the collection and distribution of assets can occur according to a fair and orderly method as specified in the Bankruptcy Code. Above all, filing Chapter 7 will give you the time to review your best options with a qualified attorney.

Which Assets Can I Keep in Chapter 7 Bankruptcy?

Under federal or state exemption laws, individual debtors are entitled to keep certain assets free from the claims of creditors. Typical exemptions are the homestead exemption, cash value of insurance policies, household furnishings, clothing, and wages. Tools used in the debtor’s job are also protected. The amount of the exemption depends on whether federal or state exemptions are available and or used.

Exempt property can include:

• The equity in your home up to about $25,150 per person filing
• Motor vehicles, up to a certain value
• Reasonably necessary clothing
• Necessary household goods and furnishings
• Household appliances
• Jewelry, up to a certain value
• Pensions
• A portion of unpaid but earned wages
• Public benefits, including public assistance (welfare) and Social Security

Generally, a discharge means that a debtor’s obligations are erased or wiped out. When a discharge is granted, it protects the debtor from personal liability on the discharged debt. A discharge is only available to certain debtors and for certain debts. For example, debtors that are not individuals cannot receive a discharge in a Chapter 7 bankruptcy.

What Is a Secured Debt?

A secured debt is one where your creditor has a lien or security interest in something you own. For instance, if you’re paying off your car or house, these creditors have a security interest in the house or car. In most cases, you will be able to continue paying on the secured debts without losing them. You will also be given the opportunity to return these assets back to the creditor and erase all responsibilities for continuing to pay these debts.