A Chapter 7 bankruptcy is often called a liquidation bankruptcy. When you file a Chapter 7 bankruptcy all your property and debts become part of the bankruptcy estate. You may keep under specified federal or state law all the property that law allows a debtor to keep as exempt. Exempt property is property neither the Court, the creditors, nor Trustee can take from you to satisfy your debts. The vast majority of Chapter 7 bankruptcy cases are “no asset cases” which means the Debtor does not have any non exempt property to liquidate for benefit of the creditors. When there is property that is not exempt it is liquidated by a person who is called a Chapter 7 Trustee. The proceeds of the liquidation are then paid to the creditors on a pro rata basis as set out in the Bankruptcy Code. At the conclusion of the case the debtor will receive a discharge of all debts eligible for discharge, the primary goal of the bankruptcy case.
Who Can File Chapter 7
Any person or entity except for railroads, stockbrokers, banks, insurance companies, municipalities are eligible to file Chapter 7 bankruptcy. You need not be a United States citizen to file bankruptcy.
Eligibility for Chapter 7
Under the new bankruptcy law, filers whose incomes are higher than the median income for a family of their size in their state may not be allowed to file for Chapter 7 bankruptcy if their disposable income, after subtracting certain allowed expenses and required debt payments, would allow them to pay back some portion of the unsecured debt over a five year repayment period. In addition, if a person has filed bankruptcy within the last 8 years, they may not be able to file a Chapter 7 bankruptcy.
Information Needed to File Bankruptcy
An attorney will need a list of assets, liabilities (including addresses, amounts owed, and account numbers), and standard financial information which is required in every bankruptcy case. Consumer debtors will need the last two years tax returns, copies of the last six months pay stubs, copies of mortgages, notes, etc. involving any debts you have incurred. Copies of canceled checks, bank statements, and any financial statement you have issued would also be very helpful. If you have a business, you will need past tax returns for the last five years, profit and loss statements for the last five years, updated inventories for the last few years, aged account receivable information, and any other information that may be helpful in helping the attorney to determine your financial condition and its cause. We may require additional information depending on the nature of your business or type of case.
The Bankruptcy Court
The Bankruptcy Court resolves all disputes regarding your case and will be the Court that issues your discharge of debts at successful conclusion of your case.
Documents Filed with the Bankruptcy Court
The case is started by the filing of a petition, schedules, statement of affairs, and statement of current income. An emergency filing may be commenced by the filing of a petition and list of twenty largest creditors, but the remaining papers must be filed a short time thereafter as provided by law or the local rules of the Bankruptcy Court in which your case is filed. This office rarely files emergency bankruptcies without all the supporting documents.
The Automatic Stay
The automatic stay works the same as with other Chapters of the Bankruptcy Code. Creditors are precluded from attempting to enforce or other wise collect a debt or proceed against estate property by the automatic stay. A creditor can proceed with collection or foreclosure efforts only after the Court rules on a motion to lift the stay filed by the creditor.
The Chapter 7 Trustee
The Chapter 7 Trustee is appointed or elected under certain conditions to preside over your case. The Trustee will ask you questions at the 341 meeting regarding background and accuracy of the information you provided in your schedules and statement of affairs filed with the court. The Trustee is responsible for administering all non exempt assets and insuring your exemptions are properly exempted and your case is filed in good faith. The Debtor is required to cooperate with the Trustee and the failure to furnish required information and documentation may be grounds for an objection to your discharge.
Exemptions
The law provides you may exempt certain property, which is free from the reach of the Trustee, the Court, and the Creditors. Your attorney will assist you in determining which exemption scheme and law best allows you to keep the bulk of your assets free from claims of your creditors upon filing your bankruptcy case. The vast majority of bankruptcy cases are no asset cases due to the fact most Texas Debtors may exempt all of their property.
Debts not Dischargeable under Chapter 7
The following are examples of debts that may not be discharged in a Chapter 7 bankruptcy:
- Most income and trust fund taxes (except in limited circumstances);
- tudent loans, whether government guaranteed or private;
- Child support and alimony;
- Debts incurred as a breach of fiduciary duty or embezzlement,;
- Most debts incurred as a result of fraud or fraudulent misrepresentations;
- Willful and malicious inflicted torts,
- Damage to persons or property while driving a vehicle under the influence of drugs or alcohol;
- Certain types of property settlements or division of property in a divorce.
We will go over in detail all the non dischargeable debts and all exceptions during your consultation.
The Meeting of Creditors
The meeting of creditors (also called the “341 Meeting”) is scheduled in every case and must be attended by the Debtor. The failure of the Debtor to attend a meeting of creditors may result in the Chapter 7 Trustee filing a Motion to Dismiss the case. The Chapter 7 Trustee presides over the meeting of creditors and all your creditors are noticed of the meeting by the court. Creditors may attend the meeting and ask questions about their debt, your assets, and examine the Debtor regarding the debtor’s schedules and statement of affairs. In the majority of consumer cases, creditors do not appear and only the Trustee asks questions of the Debtor. The Debtor is under oath and is required to answer the questions truthfully. (See the Trustee section for the type of questions the Trustee asks the Debtor at the meeting of creditors).
The Discharge Hearing
The Discharge hearing is where the Court explains the discharge and issues the Order of Discharge that discharges the debts listed in your bankruptcy that is not reaffirmed or excepted from discharge.
The Bankruptcy Courts in the Northern District of Texas do not have a discharge hearing that requires the Debtor’s attendance at the present time. The discharge order is signed by the Court and mailed to the debtor if no objections to discharge or filed by the Trustee or creditors.
Acts that Can Cause Your Bankruptcy or Debt to Be Denied Discharge
The Discharge is awarded a debtor in a Chapter 7 case unless:
- The Debtor is not an individual;
- The Debtor commits acts to hinder, delay, or defraud creditors (these acts are specified in the Bankruptcy Code and will be discussed in detail with your attorney in your consultation);
- The Debtor destroys, conceals, falsified, mutilated, or failed to keep certain records, documents, etc. from which his business or financial condition may be ascertained;
- The Debtor knowingly and fraudulently makes false oath or claim, withheld requested information or documents, or otherwise fails to explain the deficiency or loss of assets in the case;
- The Discharge may also be revoked after being granted under certain specified conditions (your attorney will discuss these with you during your consultation).
- Effect of the Discharge of Debts in Bankruptcy
The Discharge granted by the Court destroys the legal obligation to pay all debts that arose on the filing date of the bankruptcy case, unless a debt specifically excepted from discharge by the Bankruptcy Code (you attorney will discuss these debts with you at your consultation) or by court order. The Discharge is the object of your bankruptcy case, so remember that debts that you fail to list may not be discharged in the bankruptcy.
Disadvantages of Bankruptcy
Bankruptcy has some disadvantages that must be considered if you choose bankruptcy as an option to your financial problems. The fact you have filed a bankruptcy may appear on your credit record for a period of time established in the Bankruptcy Code. The filing of bankruptcy is not a bar by law to obtaining credit in the future, but is a factor that will be used by creditors when granting credit in the future. Other disadvantages of bankruptcy will be discussed with your attorney at your consultation.
Cost and Filing Procedure with the Law Office of Gregory A. Ross, P. C.
The first step to see what is the best option for your financial problem is to contact the firm to set up an initial consultation. There is no cost for the initial consultation. The attorney will discuss with you various options to resolve your financial problems after reviewing your individual finances, assets, and goals. Your attorney will suggest solutions to your financial problems that will best resolve your specific situation and achieve your desired goals.
The attorney fees for you bankruptcy is determined at your initial consultation. The cost will vary depending on the complexity of the case, the amount of debt, types of debt, dischargeability problems and other factors. The filling fee is the same in every case under this Chapter and is in addition to the attorney fee.
The attorney at your consultation will give you forms for information that your attorney will need to prepare the petition, schedules, and statement of affairs in your case. If you decide bankruptcy is the best way to resolve your financial problems, you will complete the worksheet and set up a second appointment with a representative of the firm to review the worksheet with you to insure it is complete and that all questions are answered. You will pay the attorney fee and costs at this time. If your budget will allow it, we may allow you to pay a portion of the attorney fees down and pay the rest out over time. We may require a security interest in property such as a vehicle to insure payment. The firm will have the final paperwork ready for your signature in most cases within two business days (you will be advised at the time you bring in the worksheet when to return to review and sign your bankruptcy papers). Your papers will be filed after you have reviewed the petition, schedules, and statement of affairs for accuracy completeness and have been signed by the Debtor.
Contact us at 940-692-7800 to discuss your legal needs.