Whether to File for Chapter 7 Bankruptcy

At Sulaiman Law and Associates, foreclosure attorney Ahmad Sulaiman devotes his time to educating his clients on all their options, from short sales to filing for bankruptcy. The latter option, however, is one that Sulaiman prefers his clients tread into lightly, as the perceived notion of bankruptcy and the reality of what it really means can sometimes be two different things.

For most people, bankruptcy should be the last option instead of the only choice. In my professional opinion, it is usually not the best option for our clients under the current law, especially for those who were victims of predatory lending practices.

Chapter 7 Bankruptcy

Chapter 7 is ideal for people who owe a large amount of unsecured debt, such as credit cards, medical bills, utility bills and unsecured loans without a lot of assets. Different from filing for Chapter 13, which is a reorganization tactic, Chapter 7 bankruptcy is full liquidation of all your debts. It’s like winning the lottery, as all the debts that you can’t pay are essentially erased. But the chances of Chapter 7 bankruptcy unfolding perfectly are about as likely as winning the lottery.

When to Choose Chapter 7

When it comes to a solution for fighting foreclosure, Chapter 7 is a better option than filing for Chapter 13 if you aren’t making any money. But you can still afford your home through things such as savings accounts or inheritance. The law allows you to keep your property such as a home, car, or clothing that meet certain standards. These are referred to as exemptions, and the bankruptcy trustee (who handles the logistics of your case) may sell any assets that do not meet these standards to settle your debt. Most people file Chapter 7 bankruptcy because they don’t have any assets above those limits, but they have medical bills, utility bills, and credit card balances that they cannot pay off.

Any individual is eligible for Chapter 7 as long as he or she is not barred by law from doing so. Under certain circumstances, however, some debts may not be discharged, and some people may not be able to receive a general discharge. A full review of your file will determine if this is good option for you.

It is also important to remember that you can file for bankruptcy at any time before the foreclosure sale of your home. With that in mind, it is probably beneficial for you to weigh the advantages of using other types of loss mitigation strategies before you choose to file.

This article is for informational purposes only. You should not rely on this article as a legal opinion on any specific facts or circumstances, and you should not act upon this information without seeking professional counsel. Neither publication of this article nor your receipt of this article create an attorney-client relationship.