Chapter 7 Bankruptcy

General Principals of Chapter 7

The following is some general principals of Filing For Chapter 7 Bankruptcy: (This is not an all inclusive list, should not be construed as legal advice, and you should consult with an attorney).


  • All debt that can be discharged under the Bankruptcy Code will be erased and creditors will not be able to come after you concerning unsecured claims.

  • In many instances, you will keep your property. This is because of exemptions under state law. It is important to tell us about all your assets so we can assess that all your assets are covered by exemption.

  • You may have to reaffirm the debt on your car based on recent case law, but if you want to return the car, you can surrender.

  • You typically have one meeting in a chapter 7 case, and need not be present in front of a judge. There is no debt limit to filing a Chapter 7 Bankruptcy. You can have any amount of debt to file Chapter 7.

  • Your secured loans on Real Property will effectively ride through the bankruptcy. The automatic stay will protect collection activities against you personally, unless a creditor requests relief from stay and stay relief is granted, but property will be protected in the interim period. As soon as the case is closed out, the stay is lifted, but the discharge injunction prevents collection activities.

General Considerations

Should you file a Chapter 7? This is a complex question and you should seek legal advice regarding this question. You should consider the factors below as a starting point:


  • What is the amount of your unsecured debt? You should think feasibly about your income, your projected income in the future, and how long it would take to pay off unsecured debt. There is no right amount of debt to file bankruptcy. However, if you own 50,000.00 in credit card debt, and you make $42,000.00 per year, gross, (and assuming you have no money remaining each month to pay credit cards), it would be difficult to pay off your credit card debt based on present conditions.

  • Are your debts primarily debts that cannot be discharged in bankruptcy? You should consider that certain debts may not be discharged in bankruptcy such as 1. student loans, unless you can prove they create an “undue hardship” which is a difficult standard, 2. Certain taxes, and 3. Debts that were incurred based on fraud. There are other non-dischargeable debts including debts that arise from marital settlement agreements and domestic support, so contact an attorney regarding what debts are dischargeable and what debts are not dischargable. If you can’t discharge debt, and you don’t have any unsecured debt, it may not be right for you to file a Chapter 7.

  • Are the phone calls unbearable? To some clients, they can’t bear the constant harassment. A bankruptcy filing will stop this harassment.

  • Are creditors moving towards judgments? If creditors move towards judgment, they can do three things against you. They can garnish wages (if you have them, and there are exceptions in some instances, including social security – check with an attorney), levy bank accounts associated with your social security number or ITIN number, attach liens to your real property or personal property. If a judgment is fast approaching and you are concerned about a judgment, or the effects of a judgment, filing bankruptcy may be the right option for you.

  • Have you tried workouts or reaching an agreement with your creditors? Most companies that do this for you, or consolidate your credit cards are not legitimate. We mean, that you should contact the creditors and try to work things out if it is feasible on your own. It is very difficult to get in touch with people who have authority to make decisions, but it might be worth a try. Just keep in mind that certain things you tell them could be used in court against you, so consult an attorney before negotiating.

  • Should your closely held corporation or entity file for Chapter 7 as well? See article in “Article” tab.

  • Do you need anything else from the bankruptcy besides discharge of debt? If you need a lien strip of a consensual junior lien (not avoidance of a judgment lien which is available in a Chapter 7 in some instances), you may need a Chapter 13 or Chapter 11. If you need a modification of senior lien or to cure arrears on senior liens, you may need a Chapter 13 or Chapter 11.


Eligibility

The main threshold issue in filing a Chapter 7 Bankruptcy is whether you make too much money, and a consideration of your overall expenses, and whether such ordinary expenses are abusive. There are several exceptions that are developing through the bankruptcy code and case law. We have prepared some articles and blog entries concerning eligibility and the means test, and will be posting such articles when they are complete.


Process

This is the typical process and is by no means a complete description of the process, as each case is unique and certain issues may arise in certain cases.

  • Get your free initial consultation from us.

  • You decide to retain us.

  • We will send you a list of questions to be completed.

  • We prepare your schedules. You will have to list all your debts, assets, income, financial affairs, etc.

  • We file your schedules.

  • You have a meeting with your creditors. You must bring your social security card (not a copy of the card), and a valid driver’s license to the meeting.

  • The Trustee will ask you some questions. The Trustee’s job is to sell assets for the benefit of creditors, when there are assets to sell. In most no asset chapter 7 cases, there are no assets to sell, the trustee signs off on the case.

  • We file your financial management certificate.

  • You get your discharge, and your case will be closed.