Chapter 7 bankruptcies are called so, because it is found in chapter 7 of the United States Bankruptcy Code. The Bankruptcy Code itself is found in the United State Code at Title 11. Although we at The Cooper Law Firm handle some of the most complicated chapter 7's in the state, including business chapter 7's.
A husband and wife with three children live in their family home. The mortgage payments are average, and affordable. More importantly,those payments are current with the lender, and the debtors are not struggling to pay them. In addition to the home mortgage payments, the debtors each have a car payment, both of which are average and affordable, and those payments are current with the lender. Being current with those necessary secured creditors is vitally important for anyone considering chapter 7. Why? Well I’ll tell you. It is because in chapter 7 unsecured creditors do not get paid. Unsecured creditors include such things as medical bills,credit cards, and signature loans. That is debts for which the creditor did not insist on taking collateral to secure the debts. Simply stated, if the family rids itself of burdening unsecured debt, it can more easily focus on the things it needs, not simply the things it wants. By the way, this family has $60,000 in unsecured debt, due to an abundant use of the credit cards, while Dad was out of work after a necessary surgery. He has recovered, and is back to work. However, he and his wife realize it is impossible for them to pay all debt they now owe, and their health insurer has paid only 80% of the medical costs associated with the surgery, leaving a balance due of $12,000. Now that you understand the basics of chapter 7, I will show you how chapter 7 would help this family. Notice, I said family, not just parents. This is because in handling thousands of consumer and business chapter 7 cases over the last 22 years, we at The Cooper Law Firm well understand that the relief provided in any bankruptcy case spreads throughout the entire family. With debt relief comes peace of mind, healthier individuals, a healthier marriage, and a brighter future for all. The following is based on a typical month for the family:
|Income dad takes home||$4,083|
|Bills to be paid|
|Left over income||$1,663|
By simple math this family has $1,663 per month left over for everything that a typical family of five must pay. Unfortunately, that is not enough to cover necessities, much less anything above that. Mom and Dad are quite concerned that one of the three children is going to be of college age in a few years, yet they have no savings, and cannot with their present situation afford to save for college, or for any other emergency that may arise.
One solution for this family would be to consider filing a chapter 7 bankruptcy. In doing so, they would completely eliminate the $660 per month owed to unsecured creditors. They would qualify for chapter 7 by showing the Court that they have insufficient net income (take home pay) to cover all basic and necessary expenses in the family, and that they are being prudent with their spending. The Court would agree, and the unsecured debt, which totals $72,000 would be discharged (i.e. forgiven)forever, and no creditor, whose debt is discharged in this chapter 7 would ever be able to demand payment, because under federal law they are prohibited from doing so.
If you, a friend, or perhaps a co-worker find your family struggling with unsecured debt, please contact us at The Cooper Law Firm. We would like to help.
Robert H. “Bob” Cooper