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Chapter 7 Bankruptcy Exemptions

Qualified Exemptions May Protect Your Property When Filing Bankruptcy

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Jump to Chapter 7 Qualifications

Chapter 7 bankruptcy is designed to eliminate credit card debt, medical debt, payday loans and other forms of unsecured debt. Typically, Chapter 7 bankruptcy filers have little income and few assets when they turn to bankruptcy.

Some Chapter 7 cases may eliminate debts through a process called "liquidation"—in which the debtor's possessions, assets or sources of income are sold by the bankruptcy court to pay off creditors. Many Chapter 7 filers are known as "no-asset" filers, and are able to receive a debt discharge without surrendering property. Even for individuals with assets, bankruptcy laws allow some possessions to be exempt, or protected from liquidation.

Chapter 7 bankruptcy exemptions vary from state to state, but typically include some or all of the following:

  • primary residence
  • tools
  • work equipment
  • vehicle
  • certain items of personal property
  • pension or public benefits
  • other various categories of property

In some states, individuals can choose between state and federal exemptions. A local bankruptcy attorney can explain the exemptions in your state, and how they compare to federal exemptions.

A local bankruptcy attorney can help you discover more about local property exemptions. Connect with a bankruptcy lawyer today—simply fill out our free form or call toll-free 877-833-2410 to speak with an attorney today.

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Qualifying for Chapter 7 Bankruptcy—What To Know

Filing Chapter 7 bankruptcy generally requires "passing" the Chapter 7 bankruptcy means test. The means test is a two-step process to determine eligibility:

  • First, the prospective Chapter 7 filer's income is compared to the state median income (based on family size). The means test looks at your household's income for the past six months to determine an annual income.
  • If income is below the median income, the test is "passed" and the petitioner can generally go ahead with Chapter 7 bankruptcy.
  • If not, the test becomes a bit more complex. Disposable income is calculated to determine whether or not the potential filer can afford to make payment toward outstanding debts each month.
  • The vast majority of people filing for Chapter 7 bankruptcy DO "pass" the means test, and for those who don't, Chapter 13 bankruptcy may be an option.

The means test may seem like an intimidating barrier, but many people who most need to file Chapter 7 bankruptcy are able to pass. If you've been unemployed for the majority of the past 6 months or longer, your household income will likely fall below the median. A local bankruptcy lawyer can walk you through the means test and explain your options.

Satisfying Chapter 7 Bankruptcy Requirements

Everyone who files for Chapter 7 bankruptcy or Chapter 13 bankruptcy is required to receive a Credit Counseling Briefing from an approved credit counseling agency before filing. And, in order to get a discharge, the petitioner must complete a Debtor Education Course after filing bankruptcy.

Examine Your Exemptions with a Personal Bankruptcy Attorney

Knowing your rights under U.S. bankruptcy may help you regain financial independence and silence your credits—often without having to compromise your home, car or other possessions.

Take the next step—connect with a local bankruptcy attorney to learn more about bankruptcy exemptions in your area.

To speak with a local personal bankruptcy attorney today who can evaluate your case, simply fill out the free case evaluation form below or call 877-833-2410 and connect with a lawyer near you.

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