Chapter 7 Bankruptcy

Chapter 7 bankruptcy helps you get a completely new slate.  It wipes unsecured debt away.  It's often referred to as "liquidation bankruptcy" or "straight bankruptcy."  Generally when you file Chapter 7 an automatic stay takes effect.  This is a court order that prohibits most actions from occurring, including calls from debt collectors, repossessions, utility shut-offs, wage garnishments, and foreclosures.

Typically debts that will be cleared are:

  • Credit cards
  • Personal loans
  • Wage garnishments
  • Medical bills
  • Judgements from accidents
  • Repossessed vehicle deficencies
  • Some tax debts that occurred in the past under different laws
  • Payday loans

Debts that are NOT dischargeable:

  • Child support
  • Student loans
  • Most tax debts

When a debtor files Chapter 7 bankruptcy, most, if not all, unsecured debts will be discharged.  In order to do this some of the debtors assets may be sold by the court to pay off debtors.  However, there are some assets that are protected by bankruptcy laws and exemptions. 

There is a Means Test that the debtor must qualify under.  It's designed to make sure those individuals filing actually need it and looks at the debtors household income compared to the median income.   If it's below the median income, Chapter 7 may be an option.

Vehicles

Most of us could not live without a vehicle these days.  Losing your car to bankruptcy can be a scary thought.  There are a list of exemptions in Chapter 7 Bankruptcy, which includes automobiles.  Each person in Montana is entitled to an exemption of $2500 in equity or value on a vehicle.  An automatic stay will go into effect generally after you file for bankruptcy, which will stop a repossession and may protect you from a forced sale.

 

 

 

 

 

 

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