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Chapter 7 Bankruptcy: Wiping the Slate Clean & Getting a Fresh Start
Most Americans have heard about Chapter 7 bankruptcies but know very little about how they actually work. There are many "myths" about Chapter 7 filings, most of which are not accurate. Because Chapter 7s are also known as the "liquidation" bankruptcy, many Americans erroneously believe that this type of bankruptcy filing will require them to give up all of their assets and belongings. Although credit card companies, collections agencies, and debt collectors want you to believe this, most Chapter 7 cases DO NOT require you to give up your assets or belongings. The bottom line is that In most Chapter 7 cases you can get rid of your debt and still keep your assets and belongings and still get a FRESH START.

The "Fresh Start" Bankruptcy
A better name for Chapter 7 is the "Fresh Start" Bankruptcy. The reason is that a Chapter 7 Bankruptcy can wipe out the most common unsecured debts such as credit cards, medical bills, personal loans and all other debts which are not 'secured' against some collateral. Why is Chapter 7 better described as the "Fresh Start" Bankruptcy? It's like pushing the reset the button or rebooting your computer - you start fresh without any debt!

My Assets and Belongings in a Chapter 7
The biggest concern for all individuals filing Bankruptcy is the impact it will have on their assets and belongings. The biggest 'myth' regarding Chapter 7 is that you will be forced to sell all of your assets during the process. This is simply not true in most cases. Chapter 7 bankruptcies can get you your fresh start while maintaining your existing assets.

Assets That Have NO Equity
There are several ways to protect assets in a Chapter 7 Bankruptcy. First, the Bankruptcy Court and the Trustee will not force the sale or liquidation of an asset that has no equity. The most common example of this is your house. If, for example, you own your home which is worth $400,000 and your mortgage is $450,000, you have no equity in your home. The sale of the home would not result in any proceeds that could be used to pay off your debts. As a result, the Court and Trustee will not require the sale or liquidation of the home as long as you can afford to continue paying your mortgage. This same concept applies to just about any asset you may own (such as a car).

What are Exemptions and How do they Protect My Assets?
Another way that Bankruptcy laws allow you to protect your assets and belongings is by allowing an individual to exempt some of the equity you may have in your assets. For example, everyone who owns a home is entitled to a Homestead Exemption. The Homestead Exemption can range from $50,000 to $125,000 (depending on various factors). If your Homestead Exemption amount is $50,000, that means the Court and Trustee would not sell or liquidate your home even if it was worth $400,000 and you only owed $350,000. There are many Exemptions which are provided under the law such as the Exemptions for automobiles, household and personal belongings, tools of trade and many others.

Do I Qualify to file a Chapter 7?
After a full review of your assets and debts has been conducted and a determination has been made that you would benefit from a Chapter 7, we would need to determine if you qualify to file a Chapter 7. The biggest factor in determining whether or not you qualify to file a Chapter 7 is based on your income. In order to be eligible to file, your income must be below the 'median income' for your state. The 'median income' amount increases as your family size increases. The process of determining if you qualify is also known as the 'means test'.

What Is the Process of Filing for Chapter 7?
  1. Contact us to make an appointment for a FREE EVALUTION of your case
  2. Provide us with the information and documents we need to prepare your Petition
  3. We will enroll you in a required Credit Counseling Class (which you can take online from your home computer)
  4. We will pull your credit reports
  5. We prepare your Petition and review it with you to verify the information in the Petition
  6. We File the Petition with the Court
  7. You go to a 341a Hearing of the Creditors (along with one of our attorneys)
  8. Wait for the Court to Discharge your Debt.

    9. The entire process can be completed in a short period of time and our attorneys and staff will be with you throughout the entire process.


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Allenbaugh Samini Ghosheh, LLP, is a federally designated DEBT RELIEF AGENCY as defined in the 2005 amendments to the US Bankruptcy Code. This law firm provides legal advice regarding the pros and cons of filing bankruptcy and represents people and small businesses in filing for bankruptcy relief under the US Bankruptcy Code. | Full Terms & Conditions | © 2010 All rights reserved.