The Path to a Fresh Start

There are actually five chapters of bankruptcy that can be filed, but when most people think of bankruptcy, they're thinking of Chapter 7 for good reason. If you're eligible, it's the fastest and easiest path to Life After Debt.

When I meet with clients, the first things I try to evaluate are:

1.  Is bankruptcy your best option?

2.  Will a Chapter 7 solve your problems?

The theory behind Chapter 7 is that your assets stand good for your debts. Back in the 19th century, first states and eventually Congress replaced Debtors' Prisons with Bankruptcy and originally it was filed Against Debtors by Creditors.

Today, virtually all bankruptcies are voluntary, i.e. filed by the Debtor. The reason Chapter 7 bankruptcy can be an attractive option is that Congress adopted a wide range of exemptions--stuff you can keep, even in bankruptcy. The vast majority of Chapter 7s filed are "no asset", meaning the Debtors get to keep everything.

Exemptions can be tricky, since states can opt out of Congress' exemptions, so it can help to talk to an attorney about what exemptions you're eligible for. Northern Kentucky is in commuting distance of two neighboring states, so how long you've lived where can make a difference

So, if you wouldn't lose anything you want to keep in a bankruptcy, there are still reasons a Chapter 7 might not work for you. These evaluations are best done with an experienced bankruptcy attorney.

• You can only file a Chapter 7 Bankruptcy if you haven't filed a case that received a discharge in the past eight years.
• Some debts, e.g. mortgage arrearages and most taxes aren't helped by filing Chapter 7
• If you have high income, you might not be eligible for Chapter 7

If Chapter 7 meets your debt relief needs, your attorney will need your assistance, both in answering questions and through a lot of documents to file a Petition in Bankruptcy.

Filing that petition starts the process with the Court and two things happen instantly to give you immediate relief and ensure you are playing by the rules:

• The Automatic Stay stops almost all collection against you, including lawsuits and garnishments
• Your property becomes part of the Bankruptcy Estate and can't be sold or given away without the trustee's permission.

Once it's filed, you will need to attend a hearing and follow a few other procedures, but the process for a Debtor who has an attorney is pretty painless. The average case is discharged in three to four months and you can move on to Life After Debt!