The goal in a Chapter 7 bankruptcy case is to discharge most if not all of your debts. The whole Chapter 7 bankruptcy process takes about four to six months, costs $306 in filing fees, and commonly requires only one trip to the courthouse. You must also complete credit counseling and financial management with an agency approved by the United States Trustee.
You are not eligible if you already received a bankruptcy discharge in the last six to eight years (depending which type of bankruptcy you filed) or if, based on your income, expenses, and debts, you could feasibly complete a Chapter 13 repayment plan.
To file for Chapter 7 bankruptcy, you need to complete a petition and file it with the bankruptcy court in your area. Basically, the forms ask you to describe your property, your current income and monthly living expenses, your debts and property you claim the law allows you to keep through the Chapter 7 bankruptcy process (called “exempt property”).
Filing for Chapter 7 bankruptcy puts into effect the “automatic stay.” That immediately stops most creditors from trying to collect what you owe them. So, at least temporarily, creditors cannot legally garnish your wages, levy your bank account, or seize your car, house, or other property.
By filing for Chapter 7 bankruptcy, you are technically placing the property you own and the debts you owe under the control of the bankruptcy court. You can’t sell or give away any of the property you own when you file, or pay off your pre-filing debts, without the court’s consent. However, with a few exceptions, you can do what you wish with property you acquire and income you earn after you file for bankruptcy.
The court exercises its control through a “bankruptcy trustee.” The trustee’s primary duty is to see that your creditors are paid as much as possible on what you owe them. And the more assets the trustee recovers for creditors, the more the trustee is paid. The trustee will examine your petition and supporting documents to ensure that they are complete and to look for nonexempt property to sell for the benefit of creditors. In most cases, the trustee finds nothing of value to sell.
Shortly after you file, you (and all the creditors you list in your bankruptcy papers) will receive a notice that a “creditors meeting” has been scheduled. The bankruptcy trustee conducts the meeting and will ask you questions under oath about your bankruptcy.
If, after the creditors meeting, the trustee determines that you have some nonexempt property, you may be required to either surrender that property or provide the trustee with its equivalent value in cash. If the property isn’t worth very much or would be cumbersome for the trustee to sell, the trustee may “abandon” the property — which means that you get to keep it, even though it is nonexempt.
Most property owned by Chapter 7 debtors is either exempt or is worthless for purposes of raising money for the creditors. As a result, few debtors have to surrender any property, unless it is collateral for a secured debt.
If you have pledged property as collateral for a loan, the loan is called a secured debt. The most common examples of collateral are houses and automobiles. If you’re behind on your payments, the creditor can ask to have the automatic stay lifted in order to repossess or foreclose on the property. However, if you are current on your payments, you can often keep the property and keep making payments as before.
At the end of the bankruptcy process, all of your debts are discharged by the court, except debts that automatically survive bankruptcy, such as child support, most tax debts, and student loans, unless the court rules otherwise; debts that the court has declared nondischargeable because the creditor has successfully objected (e.g. debts incurred by your fraud or malicious acts); and debts that you reaffirm, such as a car loan where you want to keep the car.
Please contact Mr. Whelan at 732-214-0300 for more information.