This is often called "straight bankruptcy" or "simple bankruptcy" because it allows you to eliminate just about all of your debts -- without having to pay anyone back over time. You case typically lasts four months start to finish.

Chapter 7 bankruptcy makes the most sense when you are facing unsecured debts, but are current on your home, car, or rent. That said, Chapter 13 -- where you have to make some monthly payments -- could still have some advantages if you have a second mortgage, debts that are not dischargeable in a Chapter 7, or a high car payment.

What Debts Are Eliminated?

Chapter 7 eliminates just about everything. Credit cards, pay day loans, personal loans, medical bills, old utility bills, and just about all of your other bills are discharged.

Typically, the only bills that make it through a Chapter 7 are student loans, child support obligations, some tax bills and criminal fines.

Will I Lose All My Things?

No. Every state has exemptions and Delaware's are very generous. Among other things, individuals get to keep $25,000.00 in whatever property you chose. You also get to keep a vehicle with up to $15,000 in equity.

You get to exempt your home, as long as it has less than $125,000.00 in equity. This means that you get to keep it as long as you could not sell it for more than $125,000.00 than you owe. So, for example, if you owe $300,000.00 on your house, it's exempt as you can’t sell it for more than $425,000.00. Given the depressed home prices lately, our clients rarely have a problem retaining their homes.

Plus you get to keep all your qualified retirement savings, tools necessary for employment worth up to $15,000.00, and certain household goods and personal effects. With exemptions like these, it is extremely rare for anyone to lose anything when they file in Delaware.

What Happens to My House & Car?

As long as they are exempt, you will keep them as long as you must keep making the regularly scheduled payments. If not, you will lose this property. But, if you do lose it, your creditor cannot come after you for deficiencies (the difference between what you owe and what the lender sells the property for).

Will This Stop A Wage Garnishment, Sheriff's Sale, and/or Levy?

Absolutely. In most cases, these will stop as soon as you file.

Do I Qualify For A Chapter 7?

Typically, this depends on how much your household makes.

If your household makes less than the median income, there should be no problem. If you're making more than the median income, you will have to take the means test, and the outcome turns on your specific financial circumstances.

That said, you may still qualify if your debts are primarily business debts, or if you're on active duty.

Will My Bankruptcy Be Accepted?

Bankruptcy is not a privilege, but a right. If you qualify for bankruptcy relief, your case will go through without any issue. Think of it like taxes: If you qualify for the deduction, you can take it. No ifs, ands, or buts about it.

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