This personal and real bankruptcy story was posted on the internet in 2011 during a bankruptcy discussion, “We own property with our home on it and an apartment building for two that we allow our kids going to school to stay rent free. We still owe $100k on the property but never have missed payments of $1300 per month. We also owe $30k in credit card debts due to health reasons. The original debt was $19k but we have not been able to pay anything for the past two years, and the debt has grown. We have no extra cash after our pay check because all our money is spent on living expenses. We can pay everything but the credit card payment. No cash reserves left. Collections are now after us, and we am being summoned to court over these issues. Can they force us to kick our kids out of the rental apartments since they are on our personal property? Will filing a Chapter 7 bankruptcy help us?”
Before this couple considers filing any bankruptcy, they need to consult with a bankruptcy lawyer who can help them determine whether or not they qualify for filing a Chapter 7 bankruptcy. If their income is at or below the median income for a family their size within the state they reside, they will automatically qualify for a Chapter 7, but if their income is more, they will have to take the Means Test to see if they qualify. If they do not qualify for a Chapter 7, then they may want to consider if another type bankruptcy might work for them instead.
The ways that filing a Chapter 7 bankruptcy might help this couple is through the bankruptcy court’s automatic stay and the discharge of the unsecured credit card debt. According to their story, the credit card debt is causing all their current financial problems.
The bankruptcy court’s automatic stay occurs the moment you file for bankruptcy protection. The stay, applicable in all types of bankruptcies, automatically stops and brings to a cessation certain lawsuits, foreclosures, utility shut-offs, evictions, repossessions, garnishments, attachments, and debt collection harassment. The automatic stay should potentially stop the lawsuit of the collections agency and the couple’s need to be summoned to court.
Filing and completing a Chapter 7 bankruptcy would have the effect of potentially discharging all of the unsecured credit card debt if all of the couple’s assets, like their homestead and rental property, fall under bankruptcy exemption categories. An exemption is where an asset is exempt from bankruptcy liquidation to satisfy unsecured debt. Exemptions are determined by either state or federal bankruptcy exemption laws.
Whether or not this particular couple should file a Chapter 7 bankruptcy depends on the complicated exemption laws as administered in their state. The possibility exists they may be better off filing a Chapter 13 bankruptcy if their exemptions are not enough to cover their homestead and rental property in which they and their children live.
Bankruptcy laws are often complicated. Contact us today, and we will help you find a bankruptcy attorney in your area that can help you with your questions on bankruptcy law.
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