Olympia family law attorney
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Chapter 7 Overview

A Chapter 7 bankruptcy, often referred to as “liquidation”, is a relatively fast proceeding: debtors can usually file and obtain their discharge within several months. A trustee, appointed by the U.S. Trustee’s Office to represent the bankruptcy estate on behalf of the creditors, will take control of non-exempt assets, liquidate them, and distribute proceeds to creditors. The exempt property (i.e., the property the debtor is entitled to retain) generally includes a certain amount for a car, a certain amount of equity in a home, certain household goods and appliances, life insurance contracts, social security, alimony, pensions or annuities, and a certain amount of personal property.

If a single debtor makes more than the annual median income, which is currently $51,161.00, there is a presumption of abuse. To overcome the presumption of abuse (and thus to qualify for filing a Chapter 7), the debtor must pass the “means test,” whereby certain expenses and costs of living are deducted from the debtor’s current monthly income. If the remainder is over a certain amount, the debtor is ineligible for a Chapter 7 and must file a Chapter 13. The difficulties and intricacies of qualifying for a Chapter 7 bankruptcy vary greatly from case to case, and depend largely on the specific details of each debtor. Generally, however, filing for Chapter 7 is generally most helpful when the debtor has large amounts of unsecured debt, such as credit card bills or medical expenses.

If you think you may qualify for a Chapter 7 or have other questions regarding your debt situation, please contact us.

Caleb Morgan