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Chapter 7 Bankruptcy – Frequently Asked Questions

Chapter 7 Bankruptcy FAQ by Sean C. Paul, Attorney

Can I keep my house and my cars when I file for Chapter 7 Bankruptcy?

In most case, yes.  Of course, some people who are contemplating a Chapter 7 Bankruptcy may find that they are behind on their house or their car payments.  In this situation, you may want to talk to your attorney about filing a Chapter 13 bankruptcy so that you can make up the missed payments.

If you are current on your house and your car, or perhaps your cars are paid off, your Chapter 7 Bankruptcy attorney will have to determine if these pieces of property have too much equity in them.  In Missouri, you can protect equity in a car up to $3,000 and equity in a house up to $15,000.  Your attorney may also be able to advise you of other ways to protect equity.

 

Do I make too much money to file a Chapter 7 Bankruptcy?

This simple question may be the most complicated and most-asked question.  The United States Trustee’s Office has published what is called the “median” income for your household size.  Being over this income threshold does require your Chapter 7 Bankruptcy attorney to take extra steps to assure that you qualify for Chapter 7 Bankruptcy relief.  However, being over this income threshold does NOT automatically put you in a Chapter 13 Bankruptcy.

 

Can I get rid of taxes in a Chapter 7 Bankruptcy?

Maybe.  The general rule is that taxes are not discharged in a Chapter 7 Bankruptcy case.  However, if you owe income taxes that were due more than three years ago, you can actually discharge those debts in a Chapter 7 Bankruptcy.   The rule for this is more complicated than the way it is stated here, but many people get relief from income taxes when they file a Chapter 7 Bankruptcy.  I have a blog entry about this that sheds some light on this area.

 

Do I still have to make my car payment if I file a Chapter 7 Bankruptcy?

This depends on whether you want to keep the car or not.  Bankruptcy is designed to help you remove your personal liability on a debt.  In other words, if you file bankruptcy, a creditor cannot hold you personally responsible for the debt.  The creditor can still go after any collateral that secures the debt.

W hen you took our your car loan, you gave up your new car as collateral.  The bankruptcy does not remove the lien on that collateral in most cases.  So, if you want to give your car up, then, of course, you won’t have to pay – the Chapter 7 Bankruptcy will discharge your personal liability on the debt.  But if you want to keep your car, you almost always have to make the regular monthly payments on it.

 

Is my credit destroyed for 10 years if I file a Chapter 7 Bankruptcy?

This is a common myth.  Yes, a bankruptcy will show up on your credit reports for up to 10 years, but that’s not the end of the story.  You can actually rebuild your credit long before that 10-year mark.   You could have a 750 credit score three years after you emerge from bankruptcy if you make smart choices and don’t over-extend yourself.  If you’ve made all of your payments on time for a consistent period, a lender will not be very concerned about a Chapter 7 bankruptcy that happened years ago.

 

Do I have to go to court for a Chapter 7 case?

You don’t have to see the judge in a Chapter 7 bankruptcy case, typically.  You will have to attend a 341 Meeting of Creditors. This is a meeting conducted by the Chapter 7 Trustee in your case.   The purpose of the meeting to to make sure you have been honest and disclosed everything about your finances.

 

Can a Chapter 7 Bankruptcy get rid of liens on my land?

In some situations, yes!  The general rules it that bankruptcy will not get rid of a consensual lien.  In other words, if you agreed to the lien, you are stuck with it (like a mortgage).  However, if you have been sued by a creditor and the court imposed a lien, I may be able to help.  This is called a judgment lien.  If you house has little or no equity, I can get rid of the judgment lien in your Chapter 7 Bankruptcy case.

 

How do I rebuild my credit after bankruptcy?

Remember that Chapter 7 Bankruptcy is only step one.  Step 2 is THE REST OF YOUR LIFE.  I can help you get your life back.  As part of my services, I will sign you up for a program called 7 Steps to a 720 Credit Score.  With this program, you will learn how to re-establish credit and improve your quality of life.

 

Call me today to discuss this in more detail or use my contact form to ask me a question.

Sean C. Paul, Chapter 7 Bankruptcy Attorney St. Louis

Sean C. Paul is licensed to practice law in the State of Missouri, and has been admitted to practice in the Federal Courts of the Eastern District of Missouri, the Southern District of Illinois, and the Central District of Illinois. He worked for one of the largest firms in the country as a bankruptcy attorney before starting this firm.

Sean C. Paul will give you the individual attention you deserve. He understands the importance of your financial decisions, and wants to help you make the best one, whether it’s a Chapter 7 Bankruptcy, a Chapter 13 Bankruptcy, or something else entirely.

Sean C. Paul, Attorney at Law
8917 Gravois Rd. St. LouisMO63123 USA 
 • 314-827-4027

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