Chapter 7 Bankruptcy Facts
Chapter 7 Bankruptcy has something in common with all other forms of bankruptcy. That commonality is a negative major life event has taken place. In most cases the event is unexpected and devastating financially.
Bankruptcy laws are designed to give people a chance to start over with some or all of their debt altered or dismissed, depending on the circumstances. A Chapter 7 bankruptcy can represent fresh start for people who have often been sideswiped by circumstances beyond their control.
Chapter 7 bankruptcy is the most common form of bankruptcy in the United States and if you are considering using it to help navigate thought difficult times, you are not alone.
In fact, during the twelve month period ending June 30, 2014, according to the United States Government U.S. Bankruptcy Courts, over one million people filed for bankruptcy. Of that total, 669,976 filed Chapter 7 Bankruptcy. Or, about 67% of all bankruptcies were Chapter 7 in the past year on a national basis.
In Wisconsin during the same time period, 22,022 bankruptcies were filed. Seventy Five percent of those (16,574) were Chapter 7 bankruptcies.
While there can be any number of circumstances leading to bankruptcy, five situations account for the vast majority – about 94% – of all bankruptcies. They are –
- Medical Expenses (42%) – Recent studies have shown 42% of all personal bankruptcies are a result of medical expenses and 78% of those had insurance.
- Job Loss (22%) – Millions of Americans are unemployed, which makes them much more likely to file for bankruptcy.
- Uncontrolled Spending (15%) – Credit card bills, large mortgages, and expensive car payments contribute to bankruptcy. Uncontrolled spending habits you on a path to needing a bankruptcy lawyer.
- Divorce (8%) – Legal fees, child support, alimony and the burden of providing for households on one income can result in ample financial stress. Because divorce rates are nearly 50% in America, this figure is likely to grow.
- Unexpected Disaster (7%) – Unexpected disasters for which it is nearly impossible to prepare include earthquakes, floods, or hurricanes. If a homeowner is without insurance or is under insured, bankruptcy is a possibility.
The Goal of Chapter 7 Bankruptcy In Beloit WI
Chapter 7 Bankruptcy allows an individual to eliminate all debt except for taxes and loans. In many cases, unsecured debt is eliminated, depending on the income level of the individual.
A bankruptcy of any sort depends on a means test. A bankruptcy means test does nothing more than define for the court disposable income available to relieve debt.
The Bankruptcy Means Test
A means test is designed to limit the use of Chapter 7 bankruptcy to those who truly can’t pay their debts. The test accomplishes this by deducting specific monthly expenses from your current monthly income. Current monthly income figure is computed by averaging income over the six calendar months prior to filing for Chapter 7 bankruptcy.
The monthly “disposable income” figure is used to pay creditors. The higher your disposable income, the less likely you will be allowed to use Chapter 7 bankruptcy. To learn what your disposable income situation is, contact a Chapter 7 bankruptcy lawyer at Monahan and Johnson. An experienced Chapter 7 bankruptcy lawyer will provide the information you will need to create your plan to move forward.
It is important to note only bankruptcy filers with primarily consumer debts need to take the means test. To take a means test – determine the following –
- Is your income is more or less than the median income
- If you earn more than the median you must determine if you have enough left over, after subtracting certain expenses, to repay some of your debt.
A final factor in determining if you have enough disposable income to pay down debt will be the number of people in your household. The more people supported by the income, the more likely you will qualify for a Chapter 7 bankruptcy, depending on the final disposable income total.
Considerations Of Chapter 7 Bankruptcy
If you do qualify for Chapter 7 bankruptcy, it remains part of you financial record in a couple of ways. Below is a list of circumstances to be aware of –
You Can Not File Bankruptcy Again For 8 Years
This is an important consequence. A Chapter 7 bankruptcy is like a ‘get out of jail free’ card. If in the next eight years you suffer large medical expenses or have other significant financial issues, the timing of your filing could serve you better if it were delayed. Conversely, if you will do better financially in the coming years, filing immediately may be beneficial. Before filing, we advise you to meet with a qualified bankruptcy lawyer to consider the best options available to you.
Bankruptcy Can Be Listed On Your Credit Report Up To 10 Years
This is the most misunderstood issue related to bankruptcy. Having a bankruptcy noted on your credit report will not ruin your credit for 10 years. In fact, many with a bankruptcy on a credit report get very good credit ratings quicker than if they didn’t file bankruptcy. Filing bankruptcy alone does not prevent you from getting good credit within a within a couple years. Bankruptcy will also not prevent you from qualifying for a car-loan or mortgage either. Most of the people we represent get credit card offers within months after completing their filing. An experienced bankruptcy lawyer has worked with many situations – call if you have questions.
Bankruptcy Can Hurt Your Credit Score In The Short Run
Bankruptcy can help your credit score too – depending on your credit score and income at the time you file for bankruptcy. Each situation is different. In any event, bankruptcy does not prevent you from rebuilding your credit and getting cards relatively soon after you bankruptcy is complete. Your Chapter 7 bankruptcy lawyer will have additional insight on this issue.
Signs Bankruptcy May Be An Option For You
There is an old saying; an ounce of prevention is worth a pound of cure. If at all possible, preventing a Chapter 7 bankruptcy is better than filing for one. Below are signs signaling financial change is needed or else filing a Chapter 7 bankruptcy could be in your future –
- You are placed under collection by companies
- Garnish of wages
- Don’t see ability to overcome what’s owed
If you are experiencing any of these situations, get some assistance from a bankruptcy lawyer to see if you can change the direction in any of these situations. If you do not, a Chapter 7 bankruptcy could be in your future.
Assisting With Chapter 7 Bankruptcy in Beloit WI
In Beloit or Janesville Wisconsin, you can file for Chapter 7 bankruptcy when you pass a means test. Monahan and Johnson in Beloit WI have an experienced bankruptcy lawyer ready to assist you with a means test and filing for Chapter 7 Bankruptcy if required. Call or email us for a free consultation to identify your options.
Monahan and Johnson S.C. offers free consultations to Beloit and Janesville WI and an experienced bankruptcy lawyer can assist you with the filing process. Call or email Tom Johnson today at 608-362-8086 for more insight about how to proceed with a Chapter 7 Bankruptcy in Beloit WI.
Learn more about calculating your current monthly income for bankruptcy purposes