Let’s Ask ESSER: What is Chapter 7 Bankruptcy?

Q:
What is Chapter 7 Bankruptcy?
– Sandy in South Milwaukee

A:

Since 1982, multi award winning attorney Todd C. Esser has been leading the field, serving the community, and helping consumers just like you achieve success through trying financial times.Proceeding under the bankruptcy code to discharge debts while keeping homes and cars and providing a fresh start. Constitutionally protected bankruptcy laws were created to safeguard consumers.

Chapter 7 Bankruptcy is often referred to as a straight bankruptcy. While considered to be a remedy of last resort, it may be the quickest way to obtaining a fresh start and becoming debt free. A Chapter 7 proceeding is commenced by the filing of a petition for relief with the United States Bankruptcy Court. Upon the filing of the petition, an automatic stay becomes effective under federal law preventing creditors from taking any action against the person filing or that person’s property. Additionally, the automatic stay stops creditors from continuing with collection actions, harassing phone calls, lawsuits, garnishment of wages, car repossessions, foreclosures, or any other creditor action intended to collect a claim or debt against the person filing or that person’s property.

As part of the proceeding, the person filing the bankruptcy petition is required to make certain disclosures on schedules, which are also filed with the court. A Trustee is appointed (a private attorney) to review the schedules and disclosure filed in the case to determine whether there are any assets available that can be sold or collected in order to pay a dividend to the creditors in the case.
It is often said that 99% of the cases filed turn out to be “no asset” cases. This is because the “exemptions” – the rules that determine what property someone is allowed to keep when they file Chapter 7 bankruptcy – are somewhat generous. In Wisconsin, you have the ability to select exemptions under federal bankruptcy laws or under Wisconsin exemption laws as well as other federal exemption provisions. Federal statutes are more generous in terms of protecting non-homestead equity, cash or deposits and will allow someone filing bankruptcy to protect up to approximately $12,725 in cash or deposits as of the date of filing. On the other hand, Wisconsin statutes allow the person filing bankruptcy to protect as much as $75,000 of equity in their homestead together with as much as $16,000 of equity in household goods and possessions and vehicles and $5,000 in deposit accounts. During the course of the proceeding, the person filing bankruptcy meets with the Trustee, who has been appointed in the case, to review the disclosures on the schedules and to answer any questions the Trustee may have concerning assets, liabilities, income, and the other disclosures. In most cases, 90 days after the filing, a discharge order is entered and sent to creditors in the case informing them that the person filing has received a discharge in bankruptcy and that they are prohibited from attempting to collect their claims from that person in the future. While there are several types of debts that are automatically not affected by the discharge i.e., child support, most tax obligations, student loan debts, fines, penalties and restitution orders, common obligations such as medical bills, credit cards, utilities, and other non-priority debts are erased giving the filer a fresh start.

ESSERLAW LLC will help you to determine if this is the best debt restructuring plan for your financial well-being. In some instances, you may be able to opt for a Chapter 13, which allows you to pay off all or some of your debts through consolidation.

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