This post was most recently updated on May 17th, 2023
You’re probably one of the many Louisville, ky residents who are struggling with debt but aren’t sure about filing chapter 7 bankruptcy or not.
It’s not just you. In the Western District of Kentucky, 1,336 Chapter 7 bankruptcy cases were filed in 2018.
However, if you’re considering bankruptcy to get a fresh financial start, it’s important to understand the process and consider all of your options.
In this article, we will walk you through the entire process and the alternative to Chapter 7 bankruptcy, making it easy for you to decide whether or not you need to file for bankruptcy.
So, let’s Explore chapter 7 bankruptcy in detail.
What Is Chapter 7? How Does It Work?
Chapter 7 bankruptcy, also known as liquidation bankruptcy, allows individuals and businesses to eliminate certain types of debt to get a fresh financial start.
However, it is governed by federal law and administered by the bankruptcy court in your district. In Louisville, ky, the bankruptcy court is located at 600 W. Broadway, Suite 100.
To file for Chapter 7 bankruptcy, you must meet certain eligibility requirements determined by the means test. The means test compares your income to the median income for a household of your size in your state.
However, if your income is below the median, you may be eligible to file for Chapter 7 bankruptcy. If your income is above the median, you may still be able to file for Chapter 7 bankruptcy after demonstrating that you do not have enough disposable income to pay your debts.
In case you are eligible to file for Chapter 7 bankruptcy and choose to do so, you will need to complete the following steps:
1. Gather Financial Documents
You must provide the bankruptcy court with detailed information about your income, expenses, assets, and debts. This includes tax returns, pay stubs, bank statements, and credit card statements.
2. Complete Bankruptcy Forms
You will need to fill out several bankruptcy forms, which can be found on the website of the U.S. Bankruptcy Court for the Western District of Kentucky. These forms will ask for your financial situation, including your income, expenses, assets, and debts.
3. Attend a Credit Counselling Class
Before filing for Chapter 7 bankruptcy, you must attend a credit counselling class. This class can be taken online or in person, and it will provide you with information about budgeting and financial management.
4. File Bankruptcy Petition and Pay the Filing Fee
Once you have gathered all of the required financial documents and completed the necessary bankruptcy forms, you will need to file your bankruptcy petition with the bankruptcy court. There is a filing fee for Chapter 7 bankruptcy.
5. Attend a Meeting of Creditors
After you have filed your bankruptcy petition, you will be required to attend a meeting of creditors. At this meeting, your creditors will have the opportunity to ask you questions about your financial situation. You will also be required to bring your government-issued identification and any documents related to your debts.
6. Attend a Second Credit Counselling Class
After you have attended the meeting of creditors, you will be required to attend a second credit counselling class. After bankruptcy, you will learn how to rebuild your credit and manage your finances in this course.
7. Receive a Discharge
if the bankruptcy court grants your Chapter 7 bankruptcy petition, you will receive a discharge of your debts. Your unsecured debts, such as credit card balances and medical bills, will no longer be legally your responsibility.
What Debt Can Be Erased with Chapter 7 Bankruptcy?
Chapter 7 bankruptcy is designed to allow individuals and businesses to eliminate certain types of debt in order to get a fresh financial start.
In Louisville, KY, the following types of debt can typically be erased with Chapter 7 bankruptcy:
- Credit card balances
- Medical bills
- Personal loans
- Payday loans
- Utility bills
- Lease and rental agreements
However, it’s important to note that not all debt can be eliminated through Chapter 7 bankruptcy. For example, secured debts, such as mortgages and car loans, can only be eliminated if you are willing to give up the collateral (e.g., your home or car).
Additionally, certain types of debt, such as student loans and most taxes, are generally not dischargeable in Chapter 7 bankruptcy. Consult with a bankruptcy attorney to determine which debts you can eliminate through Chapter 7 bankruptcy.
Can I Keep My Property if I File Chapter 7 Bankruptcy?
Under Chapter 7 bankruptcy, you may be able to keep certain types of property, while other property may be sold to pay off your debts.
Exemptions in Kentucky bankruptcy laws allow you to keep certain types of property, such as your home, car, and personal belongings, even if you file for Chapter 7 bankruptcy. The amount of these exemptions vary depending on the type of property and your specific circumstances.
For example, you may be able to keep your home if it is valued at or below a certain amount or if you have a certain amount of equity in it.
In addition to exemptions, you may also be able to keep property that is secured by a loan, such as a car or home, as long as you continue to make payments on the loan. If you are unable to make these payments, you may be able to surrender the property to the lender in order to discharge the debt.
Who Qualifies for Chapter 7 Bankruptcy? Should I File?
To qualify for Chapter 7 bankruptcy in Kentucky, you must meet certain income and debt limits. These limits are determined by the means test, which is explained above.
In addition to the means test, you must also meet other eligibility requirements to file for Chapter 7 bankruptcy. These requirements include:
- You must be an individual, partnership, or corporation.
- You must have yet to receive a discharge in a Chapter 7 bankruptcy case filed within the last eight years or in a Chapter 13 bankruptcy case filed within the last six years.
- You must complete a credit counselling course.
Deciding when to file for Chapter 7 bankruptcy is a personal decision that should be based on your specific financial situation. There are a few factors to consider when deciding whether to file for bankruptcy or wait.
Chapter 7 bankruptcy may be the best option if you cannot make your monthly payments due to overwhelming debt.
On the other hand, if you can pay your bills and are working to resolve your financial problems through other means, such as negotiating with creditors or creating a budget, you may want to wait to file for bankruptcy.
Remember that bankruptcy should be a last resort and only be considered after you have exhausted all other options.
Chapter 7 vs Chapter 13 Bankruptcy
Chapter 7 bankruptcy allows you to eliminate certain types of debt to get a fresh financial start. In Chapter 7 bankruptcy, your assets may be sold in order to pay off your debts, but you may be able to keep certain types of property through exemptions.
However, Chapter 13 bankruptcy, on the other hand, is a type of bankruptcy that allows you to reorganize your debts and create a repayment plan.
In Chapter 13 bankruptcy, you will be required to make monthly payments to a bankruptcy trustee, who will then distribute the payments to your creditors.
Therefore, the decision to file for Chapter 7 or Chapter 13 bankruptcy will depend on your specific financial situation and goals.
How Long Does Chapter 7 Bankruptcy Take?
The length of the Chapter 7 bankruptcy process can vary depending on several factors, including the complexity of your case and the workload of the bankruptcy court.
In general, however, the Chapter 7 bankruptcy process typically takes about four to six months from start to finish.
First step in the Chapter 7 bankruptcy process is to gather financial documents and complete the necessary bankruptcy forms. Your ability to collect all the necessary information can determine how long it takes.
After you have completed the bankruptcy forms and filed your bankruptcy petition with the bankruptcy court, you will be required to attend a meeting of creditors. This meeting typically takes place about four to six weeks after you file your bankruptcy petition.
Once you have attended the creditors’ meeting, you will need to attend another credit counselling session. After the creditor’s meeting, the class is typically held four to six weeks later.
Upon filing for Chapter 7 bankruptcy, your debts will be discharged. Usually, this happens about three to four months after filing for bankruptcy.
How Much Does Chapter 7 Bankruptcy Cost?
The cost of Chapter 7 bankruptcy includes the filing fee, which is currently $338, and the cost of credit counselling and any legal fees you may incur. It’s important to carefully consider the costs and benefits of bankruptcy before deciding to file. Consult with a bankruptcy attorney to determine the specific costs of Chapter 7 bankruptcy in your situation.
What’s Life After Bankruptcy Like? How Long Is It on Your Credit Report?
Life after bankruptcy can be challenging, but it can also be a fresh start. After you receive a discharge of your debts in Chapter 7 bankruptcy, you will no longer be legally responsible for paying most of your unsecured debts, such as credit card balances and medical bills. This can relieve financial stress and allow you to rebuild your credit and financial future.
However, bankruptcy can have a negative impact on your credit score and may make it more difficult to obtain credit in the future. Chapter 7 bankruptcy remains on your credit report for ten years.
Rebuilding your credit after bankruptcy may take time, but it is possible. It may be helpful to work with a financial advisor or credit counsellor to create a plan for rebuilding your credit and managing your finances after bankruptcy.
Alternatives to Chapter 7 Bankruptcy
There are several alternatives to Chapter 7 bankruptcy that may be appropriate depending on your specific financial situation. Some alternatives to Chapter 7 bankruptcy include:
- Credit counselling
- Debt consolidation
- Debt settlement
- Chapter 13 bankruptcy
In conclusion, Chapter 7 bankruptcy is a legal process that allows individuals and businesses to eliminate certain types of debt in order to get a fresh financial start. While bankruptcy can provide relief from overwhelming debt, it can also have negative consequences, such as damaging your credit score.
However, there are several alternatives to Chapter 7 bankruptcy, including credit counselling, debt consolidation, debt settlement, and Chapter 13 bankruptcy. It’s important to carefully consider all of your options and consult with a bankruptcy attorney or financial advisor before deciding to file for bankruptcy.