Chapter 7 Bankruptcy

Chapter Seven Bankruptcy is a process where debts can be discharged. “Discharge” is the Bankruptcy word for eliminate. Generally, the first step is to meet with me to determine if discharging your debts is what you truly need. Typically, a consultation is scheduled with me and we analyze whether the benefit that you would obtain with a Chapter Seven Bankruptcy filing is worth the detriment of a Bankruptcy appearing on your credit report. We also make sure that you satisfy the Chapter 7 Bankruptcy “means” test and should not file a Chapter 13 Bankruptcy instead. Most often, the largest benefit of Bankruptcy is that many debts are dischargeable, including most credit card and other unsecured debts.

I always have concerns in three general areas before a Chapter Seven Bankruptcy is filed. First, the following debts are usually not dischargeable:

• Taxes less than three years old
• Student loans unless there is a hardship
• Marital debts including support and alimony
• Driving While Intoxicated judgments
• Some criminal fines and fraud

Second, a discharge can be denied in your entire case if, among other things: you have hidden assets, kept poor records, made a false claim, acted inappropriately, or received a discharge on a case filed in the past six years.

Third, depending on what assets you own you may not be able to exempt and keep all of them. Here is a list of some common exemptions showing what a Bankruptcy Debtor can keep:

• HOUSE EQUITY
  $60,000
• HOUSEHOLD CONTENTS
  Wearing apparel
  $750

  Household goods

  $1,500

  Jewelry, watches, etc.

  $2,000

  Personal books and pictures

  $750
• EARNINGS
  Disposable earnings:
  75% of earnings, or
  30 times fed minimum per week
• VEHICLES
  $5,000
• BUSINESS ASSETS
  $20,000

A question often asked is what can be done with secured assets. Generally, if it is a car or house you are purchasing you must continue making payments if you wish to keep it. If you wish to give back the car or allow the house to be taken back by the lender you generally may do so without liability. The same applies to smaller assets purchased from department stores like refrigerators, stereos, etc., although in these cases you may usually make a “deal” with the creditor.

The cost of the average Chapter Seven Bankruptcy case is approximately $1,300 plus the $306 filing fee. Assuming the decision has been made to commence a Chapter Seven Bankruptcy filing, the first step is for me to gather information necessary for filing a complete and accurate Bankruptcy Petition. I usually have you complete one of my forms, which includes a list of all of your creditors, whether or not you intend to repay them. The list of creditors will include the name, address, date incurred, account number and amount owed the creditor. Please make sure that you provide all information to me, including any and all assets that you have on the expected date of filing, especially money in the bank and tax refunds expected.You also must furnish to me a credit counseling certificate and six months of pay stubs or other earning verification before filing.Upon completion and review of the bankruptcy petition it is signed by both you and me and I file it with the bankruptcy court.Within five to ten working days, the Bankruptcy Court sends a Notice of Meeting of Creditors to all parties, including you and me, that are listed on the mailing list portion of the bankruptcy. The notice lets them know that you are in bankruptcy. They usually will write the debt off in their books or computers. They also can make a choice, but rarely do, to sue you in bankruptcy court if they feel the debt was incurred through fraud. They can attend the creditor’s meeting and ask a few questions of you, but again, they rarely do.

During the time up to the creditor’s meeting work with me or your creditors if you owe them $200 or more regarding any reaffirmations so that you can keep secured property if you wish, or even keep the unsecured credit. (Secured items are those that can be taken from you if you default on payment.) Items that are secured that you wish to return should be returned by the creditor’s meeting.

I will meet you at the creditor’s meeting which is usually nothing to worry about. In most cases it consists of three or four yes or no questions concerning your assets. I will brief you on the relevant issues right before the hearing.

After the first scheduled creditor’s meeting the creditors have sixty days to bring a lawsuit against you. This rarely occurs. You also must complete your second credit counseling course and provide a new certificate for me to give to the Bankruptcy Court. Failure to do so will mean your case gets dismissed from the Bankruptcy Court. Within thirty to sixty days after the sixty day period expires you should receive your discharge notice in the mail. It is a computer written form that basically states you have “graduated” from Bankruptcy Court and should be saved for your records.

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The above information is provided as general information only and not intended to suffice as legal advice upon which you can rely for your particular situation. In the event that you have specific questions you are advised to contact Mr. Noyes.