Chapter 7 Bankruptcy
Chapter 7 Bankruptcy completely discharges (wipes out) unsecured debts. Chapter 7 Bankruptcy will also stop wage garnishment and civil lawsuits and, in most cases, discharge the debts underlying these proceedings. Under the chapter 7 bankruptcy law, if your income and expenses meet certain guidelines, demonstrating that you are unable to pay your debts, you can usually file Chapter 7.
Generally, you can file for Chapter 7 bankruptcy if you pass what is known as the “Median Income Test”.
Characteristics of Chapter 7 include:
Wipes Out Your Unsecured Debts
Permanent Discharge of Secured Debts if the Secured Property is Surrendered
The Automatic Stay
Stops Creditor Harassment and Collection Activity
Under the bankruptcy laws effective October 17, 2005, if your income is above the Oregon State’s median income, you may not qualify for Chapter 7 protection. Under the section, “Who Can File Chapter 7”, you will find a list of the state median income for individuals and married couples with or without dependent children.
Non-Dischargeable Unsecured Debts
Certain unsecured debts are not dischargeable in a Chapter 7 bankruptcy and must continue to be repaid in full. These include most unpaid taxes, almost all student loans, court fines and unpaid child support, among other debts that may not be discharged. However, in many cases, your monthly payments of these debts can be restructured and lowered by filing a Chapter 13 Bankruptcy. (For more information, see our section under the “Chapter 13″ tab.)
Most people keep all of their property in a bankruptcy. If you have furniture and household goods of average value and are willing to keep up your car payment(s) and payments on other secured items, you will most likely keep all of your personal property. Retirement accounts (401k, IRA, etc.) are also exempt property you would keep following a final discharge of your unsecured debts in a bankruptcy proceeding.
Keep Your House and Car
In a Chapter 7 bankruptcy, you may continue to pay your mortgage or your car loan and keep the house or car by signing a ”Reaffirmation Agreement”. This also holds true for most other "secured" loans. In effect, the Reaffirmation Agreement takes the place of your original agreement and essentially makes it as though you have not filed a bankruptcy on those particular loans. Using the Oregon bankruptcy exemptions, so long as you do not have more than $40,000 or $50,000 (for joint filers) of equity in your home after typical closing costs from a sale, you are virtually assured of keeping your home so long as you continue to make your mortgage payments (and secured lines of credit, if any). We instruct you how to obtain a comparative market analysis of your home to ensure your home will be protected if you file for bankruptcy protection. So long as you continue to make your car payments, you can typically keep your vehicle(s). Most people who have car payments do not have enough or any equity in their vehicle for the cars to be considered non-exempt. In fact, in the majority of cases, people owe more than the car is worth. It is very rare for vehicles to be an issue in bankruptcy.
Chapter 7 also gives you an option to “redeem your vehicle”. This process involves you paying the secured creditor the fair market value of the collateral, which is typically far lower than the amount you still owe on your current car loan when you purchased your vehicle. In exchange for redeeming your vehicle, the creditor provides you with the release of their lien. This is rarely done, but it may be an option worth exploring.
EVERY CASE IS EXTREMELY DIFFERENT, AND WHAT YOU MAY OR MAY NOT BE ABLE TO KEEP AND DISCHARGE VARIES GREATLY DEPENDING ON THE PARTICULARS OF YOUR CASE.
CALL OUR OFFICE TODAY AT 541-318-7112 TO MAKE AN APPOINTMENT FOR A 100% FREE CONSULTATION, AND WE’LL DISCUSS ALL YOUR OPTIONS.