Chapter 7 bankruptcy is what most people think of when they think of bankruptcy. It is being used for a fresh start when a debtor has a large amount of unsecured debt, such as credit cards, medical bills, or signature loans.
Benefits of Chapter 7 Bankruptcy:
- Stopping creditor harassment
- Stopping wage garnishments
- Inexpensive costs
- Stop most creditor related lawsuits
- Eliminate repossession and foreclosure debts
- A way to baseline your credit and stop negative reporting
- Typically, shorter time frame to discharge
- Unsecured creditors generally do not get paid back
- Generally, keep your assets, including those with secured loans
What is Chapter 7 Bankruptcy?
Chapter 7 bankruptcies can be a powerful tool for discharging debt for many people who are unable to manage their debt. 65% of all U.S. consumer bankruptcy filings are Chapter 7 cases. If you want to legally request that most of your remaining debts be discharged, then a Chapter 7 bankruptcy petition may be a good option for you. In the case of a Chapter 7 bankruptcy petition, the bankruptcy trustee may withdraw any property you own that is not exempt from collection, sell it, and disburse the proceeds to your creditors. Depending on your state-specific bankruptcy code, you, as the debtor, have the right to keep certain property considered “off-limits” to creditors. Contact us for a free initial consultation to get answers to your questions about our state exemption in Chapter 7 Bankruptcy.
Can I file for Chapter 7?
Revisions to U.S. Bankruptcy Law under the Bankruptcy Abuse and Consumer Protection Act (BACPA) of 2005, it is clearer who can stay in Chapter 7 bankruptcy, and who must alternately file for Chapter 13 or Chapter 11 bankruptcy.
In Chapter 7, most remaining debts will be discharged once your case has been deemed a “no-asset” case or after the liquidation process. Certain debts will not be discharged such as domestic support obligations and student loans. Chapter 7 bankruptcy specifically allocates that the debtor’s unexempt property may be liquidated in order for the debtor to pay off all or a partial amount of the filer’s debt. For this reason, Chapter 7 may be the ideal bankruptcy to choose if you have less property to lose.
However, under specific state law regarding property in bankruptcy, it may be in your better interest to file under Chapter 13, since this can offer better property protection and can help you save a home, car, or other asset in arrears. Chapter 7 helps to discharge large unsecured debts like credit card and medical bills. To assess your finances with the Means Test and to help you find the most appropriate course of action, a bankruptcy attorney can help you with this process.
What Is Required to File for Chapter 7 Bankruptcy?
You will meet with our firm, assess your case and possible issues, decide which chapter is best, then you will be given direction of all documentation and information needed in order to prepare your petition. This information and documentation is part of the strict due diligence requirements and allows your income, expenses, businesses, liabilities, assets, and recent transactions to be fully disclosed. Some of these documents are tax returns, paystubs, and divorce decrees. Whether filing Chapter 7 Bankruptcy as a joint petition or separate individual petitions, or if just one spouse is filing chapter 7, some information must be included for spouse. If only one spouse files Chapter 7 Bankruptcy, the income and expenses of the non-filing spouse are still required. This is needed so the court, the trustee, and creditors can examine the financial circumstances of entire household. Furthermore, all debtors are required by law to complete a credit counseling course prior to filing a bankruptcy petition at an approved provider of the United States Department of Justice. This ensures that you have explored non-bankruptcy options before filing.
Once the petition is complete it is filed with the Court. The current court fee for filing a Chapter 7 bankruptcy is about $300and the fee for a chapter 13 bankruptcy is about $280. An “Automatic Stay” goes into effect and your creditors are required to stop harassment and most collection efforts as soon as your case is filed.
341 Meeting of the Creditors
About 30-45 days after your petition is filed, a Meeting of the Creditors called a “341 meeting”, will be held. The trustee assigned to the case will lead and ask questions about the contents of the bankruptcy petition. You must be present at the meeting to answer questions under oath and under penalty of perjury about your assets, liabilities, income, and petition. Most 341 meetings are uneventful and short. Creditors are permitted to attend and to ask the debtor questions under oath. However, creditors usually do not attend.
Provided there are no issues raised at your 341 Meeting and there are not objections to the discharge of a debt or your exemptions, the final step is to wait for your discharge, which has eligibility 60 days after the conclusion of the 341 meeting. The trustee determines whether or not there are assets that can be liquidated and used to pay back your creditors. A “no-asset report”, which is a report of no distribution, will be filed with the bankruptcy court if the trustee determines that all your assets are exempt or is abandoning non-exempt assets. If the trustee determines that there are non-exempt assets and is interested in them, they may be sold and the proceeds disbursed to your creditors. You also must file your financial management certification of completion, the second counseling course, with the court no more than 45 days after your 341 meeting.
Do Creditors receive anything?
In most Chapter 7 filings, creditors do not receive any satisfaction of their claims. This outcome contrasts with a Chapter 13 case, which requires you to participate in a 3 to 5-year repayment plan. This plan allows you to pay creditors as much as you can over time, as evidenced by the BAPCPA means test, your ability, and your assets. 60 days after your meeting sets the deadline for creditors to formally challenge the discharge of your debt. You will receive notice of a discharge of debt shortly after 60 days, if your discharge is uncontested. A discharge means that you have no further liability to repay the discharged debt, and that your creditors can never collect the debt from you.
We Can Help
Bob King has significant experience with Chapter 7 Bankruptcy cases. He has successfully represented clients in chapter 7 throughout the state of Florida. Contact Bob King for a free initial consultation to get answers to your questions about the process to file Chapter 7 Bankruptcy. Contact him today at (941) 706-0632, or via email.