Filing for bankruptcy is one of the most difficult financial decisions a person can make. However, many find that Chapter 7 bankruptcy provides much–needed relief from debt and a positive step toward financial well-being.
Traditionally, filing for Chapter 7 is one of the quickest and easiest ways to file for bankruptcy and alleviate debt. However, even though Chapter 7 is one of the simplest forms of bankruptcy, there are still many legal requirements and procedures that must be followed when filing for bankruptcy.
The experienced Nevada bankruptcy attorneys at 702-Defense can help guide you through the process and ensure that your bankruptcy is handled efficiently and that you get the debt relief you have been seeking.
What is bankruptcy?
People often use the term “bankrupt” as a synonym for the word “broke” or “insolvent.” Though “insolvent’ may accurately describe the financial situation of an individual filing for bankruptcy, bankruptcy actually refers to the legal status of a person or business who is unable to pay their debts.
There are six forms of bankruptcy available under the United States Bankruptcy Code:
- Chapter 7
- Chapter 9
- Chapter 11
- Chapter 12
- Chapter 13
- Chapter 15
Chapters 7 and 13 are the most common forms of bankruptcy for individuals.
What is Chapter 7 bankruptcy?
Chapter 7 bankruptcy, which is often referred to as “straight” bankruptcy, is one of the most common forms of bankruptcy. Generally, Chapter 7 allows an individual to discharge many forms of debt, which can alleviate the financial pressure an individual is facing and give them a new start.
Even though individuals may receive a fresh start by filing for Chapter 7, an individual’s debts are not merely forgiven. To discharge these debts, many of the individual’s assets will be liquidated in order to settle debts with creditors.
When a Chapter 7 proceeding is initiated, a bankruptcy estate is created. The bankruptcy estate has temporary legal ownership of the non-exempt portions of the debtor’s property. Non-exempt property of the bankruptcy estate will then be liquidated and distributed to unsecured creditors in order to settle debts.
A court-appointed trustee will oversee the liquidation and distribution of the estate.
For more information on the Nevada Chapter 7 bankruptcy process, please visit our Chapter 7 Bankruptcy Process page.
What property is exempt from Chapter 7?
It is essential that an individual filing for Chapter 7 bankruptcy accurately identifies exempt and non-exempt property when filing for bankruptcy. Exempt property will not be liquidated and distributed to creditors to satisfy debts.
One of the most common and important property exemptions in Nevada is the exemption for an individual’s home. This allows the person filing for bankruptcy to exempt real property valued up to $550,000 from liquidation.
Some other common categories of exempt property include:
- Insurance
- Annuities
- Life insurance proceeds
- Health insurance proceeds
- Pensions
- Public employee pensions
- ERISA benefits up to $500,000
- Tax exempt retirement accounts
- IRAs (Roth and traditional) up to $1,171,150
- Personal Property
- Motor vehicles up to $15,000
- Appliances, furniture, and other household goods up to $12,000
- Works of art, jewelry, and musical instruments up to $5,000
- Pictures and keepsakes
- Personal injury compensation up to $16,500
- Money awarded as compensation for wrongful death
- One gun
- Wages
- 50 times the weekly federal minimum wage; or
- 75% of disposable weekly earnings
- Public Benefits
- Disability assistance
- Unemployment compensation
- Worker’s Compensation
- Miscellaneous
- Rental property security deposits
- Alimony or child support payments
- $1,000 of personal property of the individual’s choice
There are additional property exemptions available under Nevada and federal law. Whether state and federal property exemptions apply depends upon a number of variables unique to each case.
To determine potential exemptions, contact 702-DEFENSE to schedule a consultation.
Who can file for Chapter 7 in Nevada?
An individual, corporation, partnership, or other business organization may file for Chapter 7. This, however, does not mean that all individuals and business organizations are eligible to file for Chapter 7.
Before filing for Chapter 7 bankruptcy in Nevada, an individual must first complete a pre-filing credit counseling course. To view a list of approved credit counseling providers in Nevada, refer to the Department of Justice website.
Under Nevada bankruptcy law, the determination of eligibility for Chapter 7 is determined in part by a means test. The means test measures the average household income of the individual filing for bankruptcy against the average household income of Nevada residents.
Nevada Median Incomes
| Household Size | Monthly Income | Annual Income |
| 1 | $3,421 | $41,054 |
| 2 | $4,612 | $55,349 |
| 3 | $4,612 | $55,349 |
| 4 | $5,144 | $61,732 |
| 5 | $5,819 | $69,832 |
| 6 | $6,494 | $77,932 |
| 7 | $7,169 | $86,032 |
| 8 | $7,884 | $94,132 |
| 9 | $8,519 | $102,232 |
| 10 | $9,194 | $110,332 |
If your income is below the median Nevada household income, you will typically qualify to file for Chapter 7. If your income is above the median, you may still be eligible to file for Chapter 7 after certain deductions for expenses are taken into account.
If the means test precludes an individual from filing for Chapter 7, filing for Chapter 13 will be the likely alternative.
Even if the means test and credit counseling requirements are satisfied, an individual or business organization may not file for Chapter 7 if, within 180 days prior to filing for bankruptcy, they have had a bankruptcy petition dismissed either voluntarily or due to their failure to comply with court orders.
What debts cannot be discharged under Chapter 7?
Even if an individual or business organization is eligible to file for Chapter 7, not all forms of debt can be discharged. Though many common debts can be discharged under Chapter 7, there are several forms of debt that are dischargeable under state and federal law.
Some common types of non-dischargeable debts include:
- Child support obligations
- Alimony obligations
- Debts for personal injury or death caused by DWI
- Penalties and fines for violations of the law
- Student loans
- Income tax debt for the previous three years
- All other tax debts
- Damage awards arising from intentional wrongful acts
Individuals filing for Chapter 7 will still be liable for debts that fall within the categories listed above. There are additional categories of debts that may be non-dischargeable if the creditor challenges the individual’s request to discharge. These debts include:
- Credit purchases of more than $1,150
- Loans or cash advances of more than $1,150 taken within 60 days of filing
- Debts from embezzlement or larceny
- Debts owed pursuant to a divorce settlement
- Debt incurred on the basis of fraud.
Does Chapter 7 bankruptcy affect my credit score?
For many, filing for Chapter 7 is a difficult, yet ultimately beneficial financial decision. Though Chapter 7 provides an avenue to alleviate the burdens of debt, filing for bankruptcy can negatively affect an individual’s credit score.
Typically, a bankruptcy will stay on an individual’s credit report for a period of 10 years. How much a bankruptcy will affect an individual’s credit score depends upon the type of bankruptcy and the individual’s financial history before filing.
Despite the potential negative impact on credit score, many people find filing for Chapter 7 to have a positive net effect on their financial well-being going forward.
Why do I need an attorney?
Even though Chapter 7 is one of the simplest forms of Bankruptcy, filing for Chapter 7 still requires many complex and nuanced legal requirements to be met. It is important that you know which property is exempt from being liquidated and which debts can and cannot be discharged.
The experienced Las Vegas bankruptcy attorneys at 702–DEFENSE will guide you through the complex Chapter 7 process and help you relieve your debt burden.