Several times a week, the phone rings and I hear this from the caller: “Uh, yeah, how much do you charge for a Chapter 7?”. It is a legitimate question, however, keep these things in mind before you call.
Not everyone is eligible for Chapter 7. Be prepared for me to question you regarding whether you have been determined to even qualify for a Chapter 7. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) requires all potential debtors to submit to a means test to determine if they qualify for Chapter 7 protection. The intent of the means test is to determine whether you have the means to pay back your creditors rather than wiping them out in a Chapter 7. Is it enough that you can’t pay your bills? Not necessarily. You will have to provide income records for the six months preceding the filing of the case and those records will be compared against the average income for your household size in Alabama. Remember, just because you want to file a Chapter 7 does not mean you qualify for a Chapter 7.
Do you really want to file Chapter 7? When I explain what Chapter 7 is to people, most often times their answer is….”Really? I didn’t know it worked like that!”. A common misconception about Chapter 7 is that the only thing it does is wipe out credit card debt. However, Chapter 7 is a liquidation bankruptcy. A Chapter 7 Trustee’s job is to investigate what property you own that can be sold to pay off your creditors that you can’t pay. Legally, you are allowed to keep a certain amount of property exempt from sale. This is what we refer to as your exemptions. Each Alabama debtor is allowed a $5,000 homestead exemption and a $3,000 personal property exemption and if your property exceeds these values then it will be sold. Consider this example: A potential client meets with me and says: “I want to file Chapter 7. All I have is a car. I don’t own any other property.” The car has long since been paid for and is valued at $12,000. Because the value of the car exceeds the $3,000 exemption, the Trustee will sell the car to pay the creditors. My next question to this potential client is….”do you really want to file a Chapter 7″?
Chapter 13 may have important advantages in your case over a Chapter 7. Understand that your case is unique from everyone else’s case who has ever filed bankruptcy. Each debtor has different income, property, debt and, therefore, it unrealistic to think just because your neighbor filed Chapter 7 and “kept everything he owned” that the same thing will happen in your case. In fact, sometimes a Chapter 13 can provide much better debt relief for consumers. For instance, sometimes we are able to negotiate a lower payment for your vehicle than you would pay if you filed Chapter 7 and reaffirmed the debt. In addition, certain debts that are not discharged in a Chapter 7 can be included in a Chapter 13.
As always, my recommendation is to consult with an attorney in person to determine what your options are and how filing Chapter 7 and Chapter 13 will affect you.
Which leads to my next thought…I wonder how many doctors receive calls out of the blue asking how much they charge for a liver transplant?? Mmmm.