Chapter 7

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A Chapter 7 is  called straight bankruptcy because it is filed for the purpose of discharging out your debts. Chapter 7 generally wipes out or discharges your obligation to pay back your unsecured debts. An unsecured debt is one that has no collateral guaranteeing the debt. Examples of unsecured debts would be general credit cards, medical bills, and signature bank loans. There are certain types or classes of debts that cannot be discharged in bankruptcy. Examples of such debts would be child support, taxes less than three years old, and government guaranteed student loans.
 
As to secured loans like a house or car loan, a Chapter 7 will allow you to also wipe out the obligation to repay the money but it does not wipe out the right to repossess the collateral under the security agreement. What this means is that if you are wishing to keep the collateral, you will have to repay the loan. If you are current on a secured loan, Chapter 7 allows you to keep the collateral and to repay the loan. You can enter into what is called a reaffirmation agreement which is a contract approved by the Court in which you agree to be liable on the debt even though you have filed bankruptcy. On the other hand, if you want to surrender the collateral and wipe out the debt, you can do that also. This is common, for example, where one is "upside down" on a loan like a car note and owes much more than the car is worth.
 
In order to qualify for Chapter 7,you have to pass what is called a “means test”. The purpose if this test is to make sure you don’t make too much income to be allowed to discharge out your debts.  If you are below the medium income for Arkansas, you do not have to do a means test. If you are above the medium income level, you have to take the means test to make sure you do not have a lot of disposable income left over after your reasonable living expenses are deducted from your income.  For most people the means testing is not a problem and they are allowed to file Chapter 7. An expe- rienced bankruptcy attorney will be able to run this test to determine your eligibility for Chapter 7.
 
One question many people ask is whether or not they can keep all the property they have if they file Chapter 7. For most people, the answer to this question is yes. When you file Chapter 7, the law does not require you to give up "the shirt off your back". You are allowed to keep certain properties under what are called exemptions. The law allows you to keep or "exempt" several thousands of dollars worth of property. Most people fall well within these exemptions and their case is classified as a "no asset case." The property they own is within the exemptions and there is no court ordered sale of any property.
 
Let Us Show You How We Can Help
The Harris Law Firm is experienced in helping Arkansans file Chapter 7. We have over 25 years of legal experience.  Contact us at the Harris Law Firm. You can call us at 501-372-6985 or set an appointment online. We offer free consultation. There is never a fee unless you decide to file.