Ideally, to File a Chapter 7 You Want Unsecured Debt
Video Transcribed: Hello everybody. Edward Kelley here, a bankruptcy attorney in Tulsa for Wirth Law, and I’m here to answer your bankruptcy questions. We’re in video two of a series on Am I A Good Candidate for a Chapter 7?
Previously we talked about the Federal cutoffs for eligibility to file a Chapter 7 in Tulsa, the liquidation. I also talked briefly about a 13, but we’re going to talk about the 7 in this series, that’s the one where you can get it all done and walk away.
So to reiterate, $45,000 gross, that’s before deductions, is about the cutoff for one person, add about $10,000 more for each additional member of the household, kids included. Of course, you have to include the income of all earners. So to get past that, and again, you don’t need to include social security income and most VA benefits, although some you do. That’s a question to get with me if we go forward.
But second question. So are you a good candidate for Chapter 7 in terms of your type of debt? So ideally for a Chapter 7 liquidation, you want unsecured debt, meaning it’s not tied to collateral, meaning there’s not a car or a home or anything attached to it.
Now bear in mind, if you do have a car note, as most of my clients do, what I’m saying is it’s not a good way to get rid of it if you’re trying to keep the car. Because if you get rid of the debt, you got to get rid of the collateral. That’s what liquidation refers to. So however if you want to keep the car all you do is sign a simple reaffirmation agreement which takes that loan back out of bankruptcy, meaning you can’t discharge it but you get to keep the vehicle.
With homes, it’s a little different. You’re generally not going to sign a reaffirmation, but you can certainly keep that debt as well. That’s the other big one that a lot of my clients have a home loan, as long as you’re currently going in you’re okay, you won’t lose your home. But the best kind of debts are unsecured and nothing special about them.
If you have for example IRS tax debt or state tax debt that is less than three years old, nothing I can do about that. If you have student loan debt, if these are guaranteed normal Federal student loans, can’t do anything about that.
If you have child support debts, can’t do anything about that. Fines and penalties and costs associated with criminal convictions. In most cases can’t do anything about that. So if that’s most of your debt then you may not be a good candidate.
However, if you’ve got lots of credit cards, and again, it doesn’t matter if you have lots of that kind of debt, but on top of that, you have 10, 15, $20,000 or more in unsecured debt you’re still a good candidate. You may not be able to do anything about some of the debt but you can certainly get some breathing room and stop having to worry about lawsuits while you’re dealing with the debt you will have to pay. Now taxes three years or more can get rid of those just as unsecured. So that’s our second criteria.
So we’ve looked at are you a good candidate based on your income and household size. Today we looked at are you a good candidate based on the type of debt that you have, and next, we will look at are you a good candidate based on your ability to complete the case? So I’ll see you shortly on that. And as always, you can reach out to me directly at edward@wirthlawoffice.com or (580) 478-3130.
