Chapter 7 Liquidation Bankruptcy Basics

Filing for bankruptcy might feel overwhelming or even daunting, but it doesn’t have to be. If you’re struggling with unmanageable debt, Chapter 7 liquidation bankruptcy can offer a clean slate and a path toward financial recovery. A Chapter 7 bankruptcy satisfies your creditors, discharges eligible debts, and stops the collection calls. With its automatic stay and liquidation exemptions for essential real and personal property, a liquidation bankruptcy can help you start over and walk away from mountains of dischargeable debts.

Who Can File for Chapter 7 Bankruptcy?

Liquidation, filed under Chapter 7 of the federal Bankruptcy Code, is a common type of bankruptcy available to individuals, married couples, and small businesses. If you are unable to pay your debts because of limited income, or if your monthly payments have become unmanageable, a Chapter 7 bankruptcy can help.

Not everyone is eligible to file for Chapter 7 bankruptcy. If your household income is lower than the median income for households of the same size in your state, based on the U.S. Census Bureau statistics, you may be eligible to file.

If you make more than the median income, you can still be eligible for a Chapter 7 bankruptcy if your reasonable household obligations and expenses leave you unable to pay your debts. The “over-median” requirements to pass the “means test” can be complicated, so even if you think you make too much money, you should still speak to an experienced bankruptcy attorney to see if you qualify, or to consider other bankruptcy alternatives.

Business owners and entrepreneurs can also use their business debts to qualify for a Chapter 7 liquidation bankruptcy. If more than half of your debt is business related you may qualify for a Chapter 7 bankruptcy even if your income would otherwise be too high.

What is Chapter 7 Liquidation?

As the name suggests, a Chapter 7 liquidation is a process in which your non-exempt assets are liquidated – that means sold – to pay off your creditors. You can use the Chapter 7 liquidation bankruptcy proceeds to satisfy your unsecured debts, often for pennies on the dollar. Under federal law, all your personal liabilities that existed on the date you filed your bankruptcy petition, with limited exceptions, will be discharged at the conclusion of a relatively short process.

What Debts Can be Discharged in a Chapter 7 Bankruptcy

A Chapter 7 bankruptcy is especially useful if most of your debt is unsecured. Secured debts – like mortgages and auto loans – have different processes for collections and generally aren’t dischargeable in bankruptcy. Similarly, in most cases, student loans, unpaid child and spousal support, and certain tax debts will survive the bankruptcy process. However, unsecured debts like credit cards, medical bills, utility bills, and other loans can be wiped away through the Chapter 7 liquidation process.

What Assets are Liquidated in Chapter 7 Bankruptcy?

You may be resistant to filing for bankruptcy because you are afraid you will “lose everything.” Fortunately, in many cases, just the opposite is true. It all comes down to the federal and Connecticut property exemptions. Only property that does not fit into one of these categories or exceeds the monetary value limits within that category will be liquidated.

In most Chapter 7 cases, your home, car, furniture, personal belongings, and even a certain amount in cash, bank accounts, or cash equivalents, can be claimed as exempt. Qualified retirement savings and pension benefits are also completely protected. Under federal law, mortgages, and auto loans also cannot be defaulted because of your bankruptcy as long as you maintain your current monthly payments.

Many Connecticut bankruptcy cases are called “no-asset bankruptcies.” In these cases, everything the debtor owns fits into one of the bankruptcy exemptions, leaving no assets to be sold at all. In these cases, bankruptcy clients can cancel out all their dischargeable debt permanently without losing any of their property. Although we can’t manage this in every case, it is always the goal, and the vast majority of our Chapter 7 clients lose nothing except debt. This gives you a fresh start financially.

How Chapter 7 Bankruptcy Can Help Stop Creditor Calls Today

One of the biggest benefits to filing a bankruptcy petition is the “automatic stay.” This order is entered in every bankruptcy case – including a Chapter 7 liquidation and a Chapter 13 Wage Earners Reorganization – and pauses all collection efforts until the bankruptcy is over. That means once you inform your creditors that you have filed for bankruptcy, they must stop calling you. Any debt collection lawsuits or foreclosure actions against you will also be stayed until the bankruptcy process is over. That means you don’t have to wait for your bankruptcy to be complete to get relief. You can stop creditors from calling as soon as the petition is filed.

Is Bankruptcy Right for You?

Bankruptcy doesn’t have to be a last resort. Many people avoid talking to a bankruptcy attorney as long as possible, making bad decisions that spend down their retirement savings, negatively affect their credit rating, and make it harder to climb out of debt. Futile attempts to repay high-interest credit cards and other dischargeable debts can be avoided with a timely bankruptcy petition. Contact a bankruptcy attorney now to review your financial situation and see if a Chapter 7 Liquidation is right for you.

Chapter 7 Liquidation Bankruptcy Attorney Near Hartford and Litchfield County, Connecticut

The bankruptcy lawyers at Lawrence & Jurkiewicz, LLC represent clients throughout the greater Hartford area and the Litchfield County area. We help individuals and families gain control of their debt. We know how to take advantage of the Chapter 7 liquidation process to give you a fresh start. We will meet with you to review your financial circumstances and help you decide whether a Chapter 7 bankruptcy is right for you and your family. Please call (860) 264-1551 or contact us for a free consultation.