Law Office of Gail L. Hills
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Chapter 7 Bankruptcy

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In a bankruptcy case under chapter 7 (“straight” bankruptcy or “liquidation”), you file a petition asking the court to discharge your debts. The basic idea in a chapter 7 bankruptcy is to wipe out (discharge) your debts in exchange for your giving up property, except for “exempt” property which the law allows you to keep. In most cases, all of your property will be exempt. But property which is not exempt is sold, with the money distributed to creditors.

If you want to keep property like a home or a car and are behind on the mortgage or car loan payments, a chapter 7 case probably will not be the right choice for you. That is because chapter 7 bankruptcy does not eliminate the right of mortgage holders or car loan creditors to take your property to cover your debt.

If your income is above the median family income in Pennsylvania, you may have to file a chapter 13 case. Median family income is different in each state. For example, in Pennsylvania, the current median income for a family of three is $68,848. Higher-income consumers must fill out the “means test” forms requiring detailed information about their income and expenses to determine if they qualify to file under chapter 7.  If the forms show, based on standards in the law, that they have a certain amount left over that could be paid to unsecured creditors, the bankruptcy court may decide that they can not file a chapter 7 case, unless there are special extenuating circumstances.