Chapter 7 Basics
Chapter 7 is by far the most common type of bankruptcy. In a chapter 7 the Trustee sells all of your assets which are not exempt and distributes the proceeds to your creditors. In return for this, you obtain a Discharge and are relieved from having to repay your debts.
Examples of Exempt Assets
- $50,000 equity in a residence (homestead exemption)
- $100,000 equity in a residence if husband and wife file jointly and are both on the deed
- $2,500 in cash, bank accounts or anticipated tax refunds if homestead exemption is not used
- Up to $2,400.00 equity in automobile
- Most pensions
- Household furnishings
- Clothing
Examples of Debts Not Dischargeable
- Alimony
- Obligations in connection with a matrimonial decree
- Criminal fines or restitution
- Recent Taxes
- Most Student Loans
Chapter 7 Bankruptcy in Perspective
A Chapter 7 Bankruptcy is a “last resort” option for dealing with excessive debt. In the proper circumstances it can greatly assist a financially distressed debtor. However, it does not solve a person’s “problem” - it only rids them of their unsecured debt.
A simple example will hopefully illustrate this point. If a person is unemployed, and they incur a lot of debt due to their unemployment, when they file a bankruptcy they will obtain a discharge of their debt but they will still be unemployed.
While financial irresponsibility is certainly a cause of excessive debt, it is by no means the only one, or even the primary one. Indebtedness can result from unemployment, underemployment, catastrophic health events, marital breakups, etc. While a bankruptcy filing will get rid of debt, it will not find someone a job, or a better job, or remedy health problems or patch up a shaky relationship. Once again, it only gets rid of debt.
Will bankruptcy make you financially sound?
With the above in mind, a person considering bankruptcy really must ask themselves whether getting rid of their unsecured debt will make them financially sound and able to meet their post-bankruptcy cost of living expenses (i.e. food, clothing, car insurance, etc.) with their current income level. If the answer is “yes,” bankruptcy is certainly a viable option. If the answer is “no”, this does not necessarily mean that bankruptcy is out of the question, it just means that bankruptcy will not solve their entire problem. Something else, in addition to filing bankruptcy, may be needed before the person obtains solvency. Frequently this “something else” is a downsizing of lifestyle. Sometimes it is a second job or higher paying job, etc.
Should you file for bankruptcy?
When considering your options it is important to realize that there is no right or wrong answer to the “do I file bankruptcy?” question, and there is no one else who can really tell you what you should do. The first step is to get all of your bankruptcy related questions answered by a competent attorney so that you can make an informed business decision. You just have to get your questions answered and make a business decision about what is best for you and your family.
The best way to achieve a bankruptcy “fresh start” is to retain the services of a competent, respected bankruptcy attorney. I hope you will consider our firm.
Call our office today at (845) 343-6227 and speak to Attorney Michael O’Leary to arrange a free consultation to discuss your options regarding bankruptcy and other alternatives to bankruptcy.
Middletown, New York 10940 
