Filing for bankruptcy can feel like a crushing and final blow has just been dealt to your personal or professional life. Many feel like even saying the words ‘bankruptcy, Chapter 7, Chapter 13, or other such terms means you could not properly manage your finances. This isn’t true. A wide variety of extenuating circumstances can cause a family or individual to file for bankruptcy including:
- Personal Injury
- Wrongful Death
- Bad Economy
- High Interest Rates
- Job Loss
Filing for bankruptcy can give you much-needed financial relief you need to put your life back together. For those living Delaware, residents should know what a Chapter 7 bankruptcy is and how you or your family will qualify.
What is Chapter 7?
Filing for Chapter 7 bankruptcy means you will be discharging or waiving most or all of your debts. This type of bankruptcy is also known as a liquidation bankruptcy, as those who file will be assessing and liquidating most of their assets and debts. The entire process of filing for bankruptcy does not take long; usually between 3-6 months from the initial consultation with your attorney.
Not everyone who wishes to discharge debts will qualify for a Chapter 7 bankruptcy. As described by law, individuals who wish to file must pass the mean’s test. This test is a procedure that determines the income level of debtors. If a single person is filing for a Chapter 7 in Delaware his income should fall at or below $48,415. For a family of two, that income level is $62,432, for three, $68,518, and for a family of four, $85,305. Any additional family members beyond four are allowed to add an additional $7,500 per person.
Those who exceed the median income level may still qualify for a bankruptcy, but additional information may be required for the bankruptcy court to determine the level of income to debt ratio. Seek advice from your Delaware attorney to see if you will still qualify.
What am I Allowed to Keep?
Some property and assets are exempt from a Chapter 7 filing, meaning that the filer is allowed to keep them. For residents filing in Delaware, a debtor may not claim any more than $25,000 worth of property or assets. For married couples that number doubles to $50,000. This excludes any assets relating to a primary residence or retirement plans. While some states allow debtors to choose between federal or state laws, in Delaware, anyone filing for bankruptcy must follow state law.
Here is a list of the following exemptions allowed in Delaware:
- Homestead - Any property or land that is the primary residence of the filer up to $125,000 for single or married filers (the amount does not double if married).
- Personal Property
- Family Items - photographs, personal mementos, but antiques of high value may not be exempt
- Burial Ground
- Tools - Any tools or machinery used to operate a business. (A $75 limit in New Castle and Sussex Counties, $50 limit in Kent County.)
- Vehicles used for business, up to $15,000 each.
- Vehicle - Valued up to $15,000
- Wages - Up to 85% of earned but only unpaid wages. (Does not apply to self-employed individuals.)
- Pensions and Benefits
- 100% Police Officer Pensions
- 100% State Employee Pensions
- 100% Fraternal Benefit Society
- 100% Fireman's Disability Benefits
- 100% Workmen's Disability and Compensation
- 100% Unemployment Compensation
- 100% Life Insurance Proceeds
- 100% Health or Disability Benefits
- 100% Group Life Insurance Policy
- Up to $350 a Month in Annuity Contract Proceeds
- Wild Card - A filer may claim $500 of personal property to any exemption except for tools of trade.
There are other exemptions that residents of Delaware may be able to claim. To retain the most amount of your assets, contact a local Delaware attorney. A bankruptcy lawyer will be able to not only guide you through the bankruptcy process, but can examine your financial status and determine how you can keep the most property.
Will Bankruptcy Ruin My Credit?
Filing for a Chapter 7 bankruptcy will lower your credit approximately 50 to 75 points, but it will not "ruin" your credit. You will still be able to buy a car, find housing, get a credit card and purchase other necessary items. Your bankruptcy will stay on your credit report for a total of ten years. That time starts as soon as you file for bankruptcy. While you might have higher interest rates for the next few years, the chance to wipe your financial slate clean may help you avoid car repossession, wage garnishments or frozen bank accounts. In addition, credit companies may alert your place of employment to put a hold on your paycheck.
A bankruptcy attorney will also help you retain or reaffirm debt that you would like to keep, such as an auto loan. It is important that the correct paperwork is filled out so that a repossession does not come into play.
Filing for a Chapter 7 bankruptcy is not the end of the world. However, it does take careful planning in order to file your case correctly and not end up with dismissed case. If your case is dismissed by the court, you will still owe the court fees and all of your creditors. Get guidance from a Delaware attorney today to find out if you can get a fresh financial start.
Delaware Bankruptcy Court
824 North Market Street, 3rd Floor
Wilmington, Delaware, 19801-3024
Phone: (302) 252-2900