Chapter 7 Bankruptcy Information

What does a Chapter 7 Bankruptcy do?

Immediately upon the filing of case, the automatic stay goes into effect. This ceases all creditor collection activity related to their debts. Collection activity includes garnishments, lawsuits, the sending of letters and even phone calls. Most unsecured debts are discharged in a Chapter 7. Examples of unsecured debts are credit cards, personal loans, vehicle repossessions, past due utilities, and medical bills.

How does a person become eligible for a Chapter 7?

You can only receive a discharge for a chapter 7 once every 8 years. A discharge is the order from the Court stating that you are allowed to clear your unsecured debts. In addition, a person must receive credit counseling from an approved credit counselor within the 180 days prior to filing a case. You must also pass the “means test”. If your debts are primarily consumer debts, your income over the previous six months is compared to the median income of the county you reside. If your income is above the median income, the Court could dismiss your case or convert the case to a Chapter 13.

How does the process work? What exactly can a person lose in a Chapter 7?

The first step is to meet with the attorney. At the meeting, it will be determined if a person qualifies and that a Chapter 7 is the right course for that person. Once a case is filed, the Bankruptcy Court appoints a Trustee. The Trustee is a member of the U.S. Department of Justice. It is the Trustee’s duty to liquidate any non-exempt property and distribute the proceeds to creditors. In most individual cases, (as opposed to business cases), the Trustee does not liquidate any assets. This can happen for two reasons. The first reason is that an individual does not have any property to liquidate. The second reason is that the Trustee is not allowed to liquidate certain assets of an individual. Certain things by law are protected or “exempt” from the Trustee’s ability to liquidate property. If the Trustee does not liquidate any property, then the creditors do not receive any money from that person’s case. That person’s debts are now discharged.

Also, you must be current on your payments to any creditor that has a lien against your property. If a creditor has a lien, like a mortgage or car company, and you are not current with that payment, you risk loosing that property if a Chapter 7 is filed.

How much does a Chapter 7 cost?

The Courts’ filing fee for a chapter 7 is $335. Our attorney fees start at a reasonable rate. With just a phone call to our office, we can determine what fees would be best situated for your individual needs.

Will I have to attend court?

Yes. A hearing is scheduled in every Chapter 7 case. This hearing is called a Meeting of Creditors. This hearing is held approximately 30 days from the date of filing. The hearing is conducted by the appointed Trustee for that case. At this hearing, the Debtor will give sworn testimony and answer questions from the Trustee and creditors regarding their financial situation and their bankruptcy paperwork. An experienced attorney familiar with your case shall attend this hearing with you.

When is a Chapter 7 completed?

An Order of Discharge usually will be issued approximately 60 days after the meeting of the creditors.