What is Chapter 7 Bankruptcy?
Unlike a Chapter 13 bankruptcy, which requires a debtor to repay their debt, Chapter 7 bankruptcies provide a debtor the opportunity to eliminate their debt and receive a fresh start. Generally, a debtor filing for Chapter 7 bankruptcy has no disposable income by which their debts may be repaid and, although Chapter 7 may sound like a better option since it essentially dissolves debt and requires no repayment, it does require the liquidation of all of the debtor’s non-exempt property, the proceeds of which will be distributed among the creditors.
What is the Chapter 7 bankruptcy process and when is it the best option?
Generally, Chapter 7 is the most common type of bankruptcy and is often the quickest. The Chapter 7 bankruptcy process takes about four to six months, costs $299.00 in filing and administrative fees and often requires that the debtor make only one appearance in court. In addition, the debtor must complete two credit counseling classes, both before and after filing bankruptcy, to educate themselves about how future bankruptcies may be avoided. To manage this process, the bankruptcy court will appoint a trustee who will collect all of the debtor’s non-exempt assets, sell them and distribute the proceeds to the creditors.
One of the biggest misconceptions with regards to Chapter 7 Bankruptcy is that debtors lose all of their personal and real property. Generally, most debtors retain ownership of their assets after discharge of their debts provided that there is no equity in their assets which can be liquidated by the Trustee. The bankruptcy court will appoint a trustee who will collect the debtor’s non-exempt assets, sell them and distribute the proceeds to the creditors.
The limits to filing for Chapter 7 Bankruptcy?
Generally, a person who has filed a Chapter 7 discharge or completed a Chapter 13 repayment plan in the previous eight years, is ineligible to file a for a Chapter 7 bankruptcy. Under bankruptcy laws, debtors whose incomes are higher than the median income for a family of their size in the state where domiciled may not be permitted to file for Chapter 7 bankruptcy if their disposable income, less certain permitted expenses, would allow them to repay a portion of their unsecured debt over a five-year repayment period.
How Can Luftman, Heck & Associates Help You File For Chapter 7 Bankruptcy?
If it is determined that Chapter 7 bankruptcy is the best option for you, the attorney’s at Luftman, Heck & Associates are ready to assist you in preparing and filing the required Chapter 7 forms. Although the process may appear intimidating, our staff will walk you through the process and preparing the required lists detailing:
- Your outstanding debts
- Current income and monthly living expenses
- Your assets
- Assets a debtor is allowed to keep through the bankruptcy process
- Property owned and monies spent during the previous two years
- Assets sold or given away during the previous two years
By filing for bankruptcy, a debtor is technically placing the property they own and the debts owed into the possession of the bankruptcy court. The debtor is not permitted to sell or give away any of the property they own once the bankruptcy is filed, or repay pre-filing debts, without the court’s consent. A day or two after the bankruptcy is filed, the court will schedule a creditors meeting, which will include the debtor and all the creditors listed in the bankruptcy papers. The bankruptcy court-appointed trustee will facilitate the meeting at which the debtor may be inquired about the bankruptcy and the papers filed. This is the debtor’s only visit to the courthouse in the majority of Chapter 7 bankruptcies. Our attorneys will be there each step of the way to inform and represent you during this meeting. If, following the creditors meeting, the trustee determines that the debtor has some non-exempt property, they may be required to surrender that property or provide the trustee with its equivalent value in cash in lieu of the item. Items of little value may be retained by the debtor, although not exempt; however, those items that may be protected vary from state to state. If a debtor has designated a specific property as collateral for a loan, the loan is called a secured debt.
The most common examples of collateral are items such as houses and vehicles. If a debtor is behind on payments, the creditor can ask to have the automatic stay lifted in order to repossess or foreclose on the property. However, if the debtor’s payments are current, they may often keep the property and continue to make payments as before, unless the property has enough equity to justify its sale by the trustee. If a creditor obtained a court judgment against the debtor and has recorded a lien against property because of an unpaid debt, that debt is also secured; however, the debtor may be able to discharge the lien in bankruptcy. Upon completion of the Chapter 7 bankruptcy process, a debtor is discharged of all debts, except:
- Non-dischargeable debts, such as child support, tax debts, student loans
- Debts the court has declared non-dischargeable due to creditor objection; including those incurred by means of fraud or malicious acts.
Let us help
Although the bankruptcy process may seem intimidating, complicated and overwhelming, we are dedicated to providing you support and guidance throughout the entire process. Our efficient, straightforward approach to working with you and your creditors to achieve a reasonable repayment plan or prepare the appropriate forms and filings will help you avoid the undue stress and confusion of this intimidating situation.
The Law Firm of Luftman, Heck & Associates, LLP is a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code. The information provided on the web site is not, nor is it intended to be, legal advice or an offer to represent you.
