Chapter 7 Bankruptcy is process which allows individuals to eliminate or discharge all or some of their debt in a legal and timely fashion. Although the idea of the elimination of debt is simple, the process can be extremely complicated. To ensure success, the Chapter 7 Bankruptcy filer must be aware of the ultimate goal as well as all of the legal requirements.
The first step to filing a successful Chapter 7 Bankruptcy is to evaluate the client’s goals and eligibility for Chapter 7 Bankruptcy relief. The objective of the typical Chapter 7 Bankruptcy client will be to eliminate all, or some, of his or her debt. Whether or not the client is eligible to file is a different issue than whether or not the client should file. Requirements are fairly easy. Currently, the requirements are that you have not filed for Chapter 7 Bankruptcy in the previous eight years or a Chapter 13 Bankruptcy that paid less than a 70% to unsecured creditors in the previous six years. There is no citizenship or legal residency requirement, only that the debtor simply must be a “resident.” If you meet these simple requirements, then you would be eligible to file a chapter 7 bankruptcy.
Next, it is important to assess whether or not the client should file a chapter 7 bankruptcy. This is a much more complicated question because bankruptcy laws are complicated. Generally, if you spend more money each month than you make, if you earn less than the average household size in your state, and you do not own any non-exempt assets, a chapter 7 bankruptcy would likely be successful. Obviously where you live is important as the median income numbers and your budget can all affect the success of your case. This is also the point at which it is vital to get competent legal advice, like what we provide here at The Maridon Law Firm, to make sure you are not risking anything important to you and that you would obtain a successful result.
Once it appears you are eligible and that a bankruptcy would successfully accomplish what you hope, the process can also be complicated. Before you can file a case, the law requires every debtor to complete a credit counseling session. Once this is complete, the legal process of filing a Chapter 7 Bankruptcy begins with the preparation and filing of the bankruptcy petition and schedules. The bankruptcy petition and schedules is a series of documents that contain information about your debts, assets, income and general financial status for the previous few years. The bankruptcy petition is used to demonstrate that you qualify for Chapter 7 discharge, to determine which of your debts will be eliminated, what property you will be allowed to keep and which debts you have chosen to keep.
Once your case is filed, certain documents must be mailed to the trustee assigned to your case and you will be assigned a date for a meeting of creditors as provided under 11 U.S.C. §341. The meeting occurs approximately four to six weeks after filing of the Chapter 7 Bankruptcy. The debtor’s attendance at this meeting is absolutely required, except in very rare circumstances. The Trustee presides over the meeting. The Trustee reviews the filing for possible fraud issues, represents your creditors, and evaluates your qualifications for Chapter 7 Bankruptcy. The Chapter 7 Trustee will also investigate property and valuation. One of the main duties of the trustee is to liquidate any non-exempt property and distribute the proceeds fairly among creditors. At the First Meeting of the Creditors, the Chapter 7 Trustee will ask a series of questions, and typically make his or her findings during this short meeting. If the Chapter 7 Trustee issues a “no asset” report or “abandons” your property, the Chapter 7 Bankruptcy will proceed and the debtor will not lose any property.
Approximately 60 to 90 days after the First Meeting of Creditors you should receive your discharge, and your case will close. During this period all of your creditors will be give an opportunity to review your Chapter 7 Bankruptcy filing, and have the right raise any objections. You will also be given the opportunity to reaffirm, or promise to keep paying on your secured debts such as a home or a car. At the time of your discharge, your pre-filing unsecured dischargeable debt will eliminated forever.
It is critical to contact a Bankruptcy Law attorney to see if you qualify for Chapter 7 Bankruptcy, and if a Chapter 7 Bankruptcy is the right choice to address your financial needs.