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Chapter 7 Information In Las Vegas, NevadaPlease note, this article concerns a chapter 7 bankruptcy (“Seven”) in Las Vegas, Nevada. Even though bankruptcy law is federal, bankruptcy laws differ from state-to-state. So, consult an experienced, local, bankruptcy lawyer if you have questions about bankruptcy in your state. Arguably, the Seven is what most people think of when they think of bankruptcy. It is also called a “fresh start” as it allows you to eliminate (discharge) most of your debts in three to four months. The reason that it takes three to four months is that the bankruptcy code gives creditors a chance to challenge the dischargeability of your debt. A Seven will, under normal circumstances, discharge your medical debts, credit cards, wage garnishments, judgments and the majority of all of your other debts and will also stop lawsuits. However, the Seven does not discharge certain types of debts. The most common nondischargeable debts are school loans, (in most cases) governmental penalties (traffic tickets, restitution, etc.) child support, spousal support (alimony), and criminal restitution penalties.
Automatic StayThe Automatic Stay (“stay”) starts once you file for bankruptcy. The Stay stops lawsuits, repossessions, wage garnishments, and any further collection attempts. Under the stay, creditors are prohibited from either contacting or attempting to collect any debt from the debtor. Please note, the ability of the automatic stay to stop repossessions is limited in that if you want to keep your car or house permanently, you will have to keep up with your payments or make up any overdue payments. If you decide that you don’t want to keep your car or house or you cannot make up the past due payments, you may be able to continue driving your car for the three or four months during your bankruptcy, and you will be able to stay in your house through the bankruptcy. The only exceptions to you being allowed to drive a car or live in your home during your entire bankruptcy are if a creditor files a motion to lift the Stay; which, if it is approved the creditor will be able to either proceed with a foreclosure or start foreclosure proceedings.
Who Can File the Seven?A Seven is limited to people who can pass the means test. The means test states that you are only able to file a Seven if your income is less than a set amount. This income limit (derived from the IRS) is based upon the cost of living for where you live and how many dependents that you have. If you are over the statutory wage limit, you may then be forced to file a chapter 13. A Chapter 13 bankruptcy (“13”), unless it is the only option, is not recommended for most debtors as a 13 requires monthly payments for three to five years.
Nevada’s Bankruptcy ExemptionsA debtor’s estate, which, gives a trustee temporary control of your property, is formed when you file a Seven. One of the trustees duties is to find non-exempt property from a bankruptcy filer, sell the property and then give the proceeds of the sale to the creditor. The trustee receives 10% of whatever they can recover. So, the trustee has an incentive to get the most they can from your estate. Luckily though the bankruptcy code has exemptions; which, allow certain types of property to be free from the creditors in bankruptcy. Bankruptcy exemptions will enable you to keep the basics necessities of life, like automobile, furniture, and tools used for a profession. Also, there are exemptions for sentimental (keepsakes and family photos are exempt) or public policy reasons. For example, $16,500 in personal injury awards that are related to pain and suffering are exempt, and vocational rehabilitation benefits are 100% exempted. Examples of some of the other Nevada’s exemptions are that you can retain a car with up to $15,000 in equity, furniture worth up to $12,000 and if you file a homestead, $550,000 in equity for the house where you live. Overall, Nevada’s exemptions are very generous, and the vast majority of bankruptcy filers will have what is considered to a be a no asset case; which means that a bankruptcy filer will not lose any property.
Why Would You Not File A Seven If You Are Qualified?The Seven though, even if you pass the means test, is not a proper choice for some debtors. First of all, you can only file a Seven once every eight years. So, you will be forced to file a Chapter 13 Bankruptcy if you filed another Seven within eight years. Also, the Seven does not allow you to catch up on past due mortgage or car payments, and a seven is not a good option if you want to keep the non-exempt property. (I.E., rentals, boats, dirt bikes, expensive antiques, etc.)
Credit CounselingAll filers, unless they are incapacitated, are required to take credit counseling. If you don’t do the credit counseling, your case will be dismissed. Credit counseling, which is normally done online, is not expensive (courses range from $15 to $25), and the classes only take an hour or so to complete. You have to complete both pre-filing and post-filing credit counseling courses. You will have to supply a trustee multiple documents like your last seven months of paychecks, six months of bank statements, mortgage statements, and your previous two years tax returns. Also, schedules are filed which give the Court information concerning your expenses, and income and, all of your creditors also will have to be notified of your bankruptcy filing. Approximately, 30 days after filing you will have to attend a 341 meeting. (“Meeting of creditors”) . The 341 meeting is a chance for creditors to ask questions concerning your debt and if possible argue that your debt should not be dischargeable. However, the majority of the time no creditors will appear at the 341 hearing. For most debtors, the 341 lasts only around three or so minutes or less. Two months, after the discharge, assuming you have completed all of your credit counseling courses, you will receive the discharge.
A Seven is time-consuming, and paperwork intensive. Also, certain mistakes made in filing can leave the debtor in worse shape than if that had not even filed for bankruptcy. That is why it is highly recommended that you retain an attorney to prepare your bankruptcy petition. Hiring a lawyer also makes fiscal sense as the $700 or more than you pay your lawyer will result in savings of potentially millions once you receive the discharge.
This article is just a short explanation of the pros and cons of the seven. If you have more questions, contact us for your free, no pressure, consultation and find out of bankruptcy is a right fit for you and your family.