Chapter 7 bankruptcy is a clean slate on your debts. It is a fresh start unburdened by your prior debts. In Chapter 7 bankruptcy, you don’t have to be unemployed or living in a rented room. You can hold down a solid job and have a home, car, and possessions. If you qualify for a Chapter 7 Bankruptcy, you can keep your home, car, and possessions, and not have to pay any money back to creditors.
Chapter 7 Bankruptcy also puts a stop to pending lawsuits. Are you being sued? On debt? For a personal injury action? Breach of a contract? Back commercial rent? A Chapter 7 Bankruptcy can result in the discharge of your personal liability on these actions, and the dismissal of the lawsuits.
Many times a debtor (person filing bankruptcy) can’t maintain the minimum payments on credit cards, medical debts, personal loans, business loans. A Chapter 7 Bankruptcy gets you ta clean slate on their debts. It’s wonderful. You’re keeping what you want to keep. You’re getting rid of what you want to get rid of, and you move forward with that clean slate.
Types of Chapter 7 Clients
Clients who are current on debts
These clients are current on everything, but they know that they can’t sustain making minimal monthly payments forever. Or that it doesn’t make sense to make minimum monthly payments forever but never see a dent in the amount of debt they owe. This type of client can actually qualify for a Chapter 7 bankruptcy. They stop making their payments, we line everything up perfectly, we file that case, they’re good to go.
Clients that are not current
This type of client is not current, and everything is in collections. It’s gone from the original creditor to a collection agency. They’re getting calls, their phone never stops ringing. Their mailbox overflows everyday with demands for payments, solicitations to help them get out of debt. Once someone becomes my client, I send what’s called a Notice of Representation of Consumer Debtor out to every creditor that they want me to notify. In plain English it says, “Don’t bother my client ever again or you’re subject to violations of the Telephone Collections Practice Act, the Fair Debt Collection Practices Act”.
That will restore some normalcy because even before the bankruptcy case has been filed, all the harassment stops. No more creditor calls, no more creditor mailings. The creditor mail goes to my office. That’s important. It gives us time to get their case together and file it Those people are a little further down the line.
Clients being sued
Some clients come in because they just got sued. “Oh my God, I’m being sued by Capital One for $18,000 and I all I want to do is deal with this. I need help!”
They come in and they’re being sued and they’re terrified. The lawsuit says you have 35 days to respond.
Then, during the initial consultation in my office, I’ll take a look at the bigger picture. We can stop the Capital One lawsuit, but there can be other financial issues that can be helped in the bankruptcy. For example, in addition to the Capital One lawsuit, the client has $80,000.00 in revolving credit card debt, wife has $50,000.00 in credit card debt that is delinquent.
These clients come in having already received a judgement. Either they get a notice of wage execution, their wages are going to be garnished, they come in because suddenly they have no money in their bank account because they had a bank levy, and/or they didn’t answer the information subpoena saying, “Where do you have all your assets?” So the, sheriff finds their money, where they work. It’s not hard, the sheriff subpoenas every major and smaller bank in your area.
Suddenly you go to pay your rent or mortgage, put gas in the car and buy some groceries, and you have no money.
Clients past the point of lawsuits and judgements
These clients are past the point where there’s a lawsuit, so they have a lot of old debts. We’re going to clean it up. These may be personal debts, they may be judgments for unpaid business debts.
Nationwide statistics indicate that people file Chapter 7 primarily because of medical debt. In my experience, I peel back the layers on medical debt and look at my clients entire financial picture and situation, often times it’s just several thousand dollars of medical debt and not collectable pursuant to a statute of limitations. Certainly, I have clients who have tremendous medical debt or have some sort of catastrophic illness and insurance didn’t cover 300 medical bills. That’s fine, that’s another scenario for a Chapter 7.
With any case, the first step after representation is that I want to stop the collection calls, creditor harassment, and creditor correspondence. Keep in mind that just by sending those Notices of Representation, they do not stop pending lawsuits. Lawsuits continue until a bankruptcy case is filed. Once the bankruptcy case is filed, the automatic stay (stop to collection efforts, lawsuits) is put in place and everything is officially put on hold.