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Overwhelmed By Debt? Chapter 7 Bankruptcy Can Provide A Fresh Financial Start.

Most Americans face debt, but few are willing to discuss it openly. Unfortunately, shame and secrecy too often prevent individuals and couples from seeking the help they need and utilizing available debt relief tools like Chapter 7 bankruptcy.

If you find yourself facing insurmountable debt, it’s time to discuss your concerns and your options with our caring Wisconsin bankruptcy lawyers at Friedrich & Fletcher, S.C. Based in Madison, we help clients throughout the state discharge debts and look forward to a brighter future. We want to help you, too.

The Basics Of Chapter 7 Bankruptcy

Chapter 7 bankruptcy helps individuals discharge most or all of their unsecured debts – those that are not backed by collateral. The most common debts discharged in Chapter 7 include:

  • Credit card debt
  • Medical bills
  • Personal loans and payday loans
  • Tax debts that are more than three years old (with some exceptions)
  • Overdue utility bills and phone bills

The term “discharge” means the debts are forgiven and do not need to be repaid. There is a potential tradeoff, however. Chapter 7 is sometimes called “liquidation bankruptcy” because debtors may be required to liquidate some personal property to partially repay creditors.

When you initiate a Chapter 7 case, a court-appointed trustee will be assigned to oversee bankruptcy proceedings. The trustee’s job is to examine your assets and, if necessary, liquidate certain nonexempt property to repay creditors. Fortunately, many essential items like your home, vehicle and personal effects may be protected by exemption laws (if you own them outright or are staying current on loan/mortgage payments).

Typically, the Chapter 7 process takes about three to six months to complete. During this period, an “automatic stay” is enforced by the court, temporarily halting creditors from pursuing debt collection against you. This can provide immediate relief from persistent collection efforts and creditor calls.

Are You Eligible For Chapter 7?

Chapter 7 has income eligibility requirements. Before you can file, you’ll first need to take a “means test.” This is simply a comparison of your household income to the state median income for a household of your size. You can immediately qualify if your income is below the median. If it’s higher than the median, you may still be eligible, but a more thorough financial analysis will need to be completed. Those who don’t qualify at all may still be able to pursue other types of bankruptcy or alternative debt relief options.

Additionally, you should not have filed for Chapter 7 bankruptcy in the past eight years. It’s also important to complete a credit counseling course from an approved agency within 180 days before filing.

Limitations Of Chapter 7 And Important Considerations

Filing for bankruptcy is a major decision, and it’s important to weigh the pros, cons and limitations. Here are some things to keep in mind:

Not all debts can be discharged: Some debts, like child support, student loans, and certain tax obligations, cannot be discharged. If these are your primary debts, Chapter 7 may not be right for you.

Timing is important: Bankruptcy is commonly tied to divorce. Before you file for either, you should speak to an attorney about whether it is most advantageous to pursue bankruptcy as a couple or as an individual.

Your credit score will be impacted: A Chapter 7 filing stays on your credit report for 10 years. It will also significantly lower your credit score (if years of unmanaged debt haven’t already done so). This could impact other areas of your life, including your employment and housing prospects. The reassuring news, however, is that you can start to repair your credit nearly immediately, and you could become eligible for limited credit within 12 to 18 months.

Discuss Your Options With A Wisconsin Bankruptcy Lawyer Today

From our office in Madison, Friedrich & Fletcher, S.C., serves clients throughout Wisconsin. To learn more about how a knowledgeable bankruptcy law attorney can help you, call us today at 608-258-4660 or reach out online.