Chapter 7 Bankruptcy

Filing Chapter 7 bankruptcy is a procedure provided for under United States federal law by which you are entitled to a fresh financial start. It is normally designed for those with few or zero assets. Chapter 7 bankruptcy can effectively eliminate most kinds of unsecured debt. Examples of unsecured debts that can be discharged by Chapter 7 bankruptcy include credit card balances, medical bills, most personal loans, judgments resulting from car accidents and deficiencies on repossessed vehicles. Debt that cannot be discharged include student loans, taxes and spousal or dependent support, alimony or maintenance payments.

To begin the bankruptcy process, the debtor must file a bankruptcy petition. In addition, the debtor must also file a schedule of assets and liabilities; a schedule of current income and expenditures; a statement of financial affairs and a schedule of executory contracts and unexpired leases. The filer also needs to provide the bankruptcy trustee assigned to the case with a copy of the tax return for the most recent tax year as well as tax returns filed during the case and for prior years that had not been filed when the case began. Individual debtors with primarily consumer debts also must file a certificate of credit counseling; a copy of any debt repayment plan developed through credit counseling; evidence of payment from employers, if any; a statement of monthly net income and any anticipated increase in income or expenses after filing and a record of any interest the debtor has in federal or state qualified education or tuition accounts.

In order to complete the Official Bankruptcy Forms that make up the petition, statement of financial affairs, and schedules, the debtor must provide:

  • A list of all creditors and the amount and nature of their claims
  • The source, amount and frequency of the debtor’s income
  • A list of all of the debtor’s property
  • A detailed list of the debtor’s monthly living expenses, i.e., food, clothing, shelter, utilities, taxes, etc.

A married couple may file a joint petition or individual petitions. Even if filing jointly, a married couple is subject to all the document filing requirements of individual debtors; forms may be purchased at some office supply stores or downloaded from the Internet at www.uscourts.gov/bkforms/index.html.

Bankruptcy courts charge a $245 case filing fee, a $46 miscellaneous administrative fee and a $15 trustee surcharge. Normally, the fees must be paid to the clerk of the court upon filing. With the court’s permission, however, individual debtors may pay in installments. The number of installments is limited to four, and the debtor must make the final installment no later than 120 days after filing the petition. Under certain circumstances, the court may extend the time of any installment, provided that the last installment is paid not later than 180 days after filing the petition.  If a joint petition is filed, only one filing fee, one administrative fee and one trustee surcharge are charged. Failure to pay these fees may result in dismissal of the bankruptcy case.

Many states have taken advantage of a provision in the Bankruptcy Code that permits each state to adopt its own exemption law in place of the federal exemptions. In other jurisdictions, the debtor can choose between a federal package of exemptions or the exemptions available under state law, but may not combine the two.

Between 21 and 40 days after the petition is filed, the case trustee (described below) will hold a meeting of creditors.  During this meeting, the trustee puts the debtor under oath, and both the trustee and creditors may ask questions. The debtor/s must attend the meeting and answer questions regarding the debtor’s financial affairs and property. The bankruptcy judge is not allowed to attend this meeting.

When you file for Chapter 7 bankruptcy, an “automatic stay” is implemented in which you will be protected from creditor harassment since creditors are forbidden by federal law to harass you, your family and even your employer once bankruptcy proceedings have begun. The Fair Debt Collection Practices Act establishes guidelines under which debt collectors may perform their business, defines consumer rights pertaining to debt collection and sets down penalties and remedies for violations. It is often used in combination with the Fair Credit Reporting Act.

In addition to eliminating your overwhelming debt, filing for Chapter 7 bankruptcy usually allows you to retain ownership of some of your property. If your vehicle and home mortgage payments are up-to-date and if you hold little or no significant equity in your property, you may be able to make arrangements to reaffirm the debt. Keep your car or truck, hold onto your family’s home and retain your personal belongings, but eliminate your debt; that is the function of Chapter 7 bankruptcy. If you do not file Chapter 7, however, you may lose your home to foreclosure and your vehicle to repossession due to missed or delinquent payments.

The ability to reestablish your credit after filing Chapter 7 bankruptcy is often easier than before. Although filing for a Chapter 7 bankruptcy can remain on your credit report for up to 10 years, you can start reestablishing your credit immediately. Although you will have to pay higher interest rates and fees, you should qualify to purchase a home or car and qualify for credit cards soon after going through Chapter 7 bankruptcy. Applying for good types of credit, such as secured credit cards, can actually help you to rebuild your credit score, putting you on the patch to financial health.

When you call Client First Bankruptcy for your initial phone consultation, you will get advice you can trust from a qualified bankruptcy representative. If you are saddled with huge credit card balances or threats of lawsuits, you need to speak with an experienced bankruptcy lawyer to discover the advantages of filing Chapter 7 bankruptcy. We may be able to help you eliminate crushing debt, sleep better at night and start the new year with a clean financial slate. Call us toll-free today at 800-383-6004.