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Chapter 7 Bankruptcy


A Chapter 7 bankruptcy is known as a “straight” bankruptcy or a “liquidation” bankruptcy.  It requires an individual to give up property that is not “exempt” under the law, so the property can be sold to pay creditors.  However, all but a small few of the bankruptcy cases that I have filed over the last 11 years have been "liquidation" cases, i.e. my client did not have to sell any of their personal property or real property (real estate) to pay back their creditors. Almost all of my clients have been able to keep ALL of their property. The likelyhood that you will have to pay creditors anything is quite low. However, if you have property that cannot be claimed exempt by the bankruptcy law exemptions, you may still file a Chapter 13 bankruptcy, which will allow you to keep all of your property. Generally, those who file a chapter 7 bankruptcy keep all of their property except property which is very valuable or which is subject to a lien which they cannot avoid or afford to pay.


     If you want to keep property like a home or a car AND you are a behind on the mortgage or car loan payments, a chapter 7 case may not be the right choice for you.  That is because a chapter 7 bankruptcy does not eliminate the right of a mortgage holder or car loan creditor to take your property to cover the debt you owe on the car or home. Mortgage holders and car loan lenders are considered secured creditors. If you don't make your car payments, your car will be repossessed. If you don't pay your home mortgage payments, your house can be foreclosed upon. If you need to get caught up on mortgage payments or if you need to get caught up on car payments, a Chapter 13 bankruptcy make be the right choice for you. 


     If your income is above the median family income in Washington state, you may have to file a chapter 13 case. The annual median family income for a family of four in the state of Washington, as of November 1, 2014 is $84,786.00. A single person household can make up to $52,384.00 per year. The court looks at all of your gross income (income before taxes and deductions) the six (6) months prior to the month you filed to determine your average annual income. If you are above the median, you will most likely have to file a Chapter 13 bankruptcy. The court looks at all income sources, including unemployment compensation, pension, retirement, and even contributions from others to your household living expenses.  


For more information on Chapter 7 bankruptcy and bankruptcy in general, check out the my Bankruptcy Information Guides and Pamphlets page and my Bankruptcy Frequently Asked Questions & Answers page on this website.

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