Bankruptcy Chapter 7

Watch videos and read articles about bankruptcy chapter 7. Chapter 7 is a so called straight bankruptcy option, meaning that it eliminates debt rather than creating a payment plan to repay debt over 3-5 years. This is the most common bankrupcty option and for good reasons.

This site is based on video presentations of the bankruptcy chapter 7 law, why read when you can watch a presentation explaining it all, its quick and gets straight to the point. There are a lot of videos about this area and I spent a lot of time reviewing and selecting the best videos that explains the bankruptcy chapter 7 subject.

Chapter 7 Bankruptcy Information Overview

Chapter 7 Bankruptcy Information: Overview of Chapter 7.

Chapter 7 Definition

Chapter 7 bankruptcy or the liquidation bankruptcy is sought when reorganization of the assets under Chapter 13 does not seem a plausible solution. Chapter 7 bankruptcy can be defined as the last resort of a debtor in dire financial position, wherein, the acceptance of the petition by the court will result in the sale of the non-exempt assets of the debtor and its distribution to the creditors by the trustee appointed by the court.

The Chapter 7 bankruptcy process begins with the debtor undergoing a credit counseling session under an authority licensed by the National Foundation for Credit Counseling (NFCC) or the Association for Independent Consumer Credit Counseling Agencies (AICCA). This training session aims to enhance the financial management skills of the debtor, throwing into light the causes for the present dilemma and the steps to be undertaken to overcome the situation. This counseling, which can be taken in person, through phone or online, has been made mandatory and is to be undertaken within six months before filing the petition for Chapter 7.

The debtor then makes an application to the federal bankruptcy court with a detailed statement on his financial situation, assets and liabilities, amount due, certificate of credit counseling, etc. along with the requisite fee. The Court will evaluate the petition on the submission of $245 case filing fee, a $39 miscellaneous administrative fee, and a $15 trustee surcharge. Failure to make the fee payment or the submission of the requisite papers will lead to the rejection of the petition by the court.

The court then appoints a trustee who is to evaluate the financial affairs of the debtor, sell the non-exempt assets and distribute them amongst the creditors in accordance to the terms dictated by Chapter 7. The trustee is to call up a meeting of creditors between 20 and 40 days after the petition is filed and question the debtor under oath. The unsecured creditors are demanded to provide proof of their dues to the trustee after whom he will submit his findings to the court for the final decision.

Even though the Chapter 7 bankruptcy provides an opportunity to make a new beginning to the financial position of a debtor, its impact is left on the credit report for seven to ten years.

Chapter 7 Bankruptcy Discharge

Chapter 7 bankruptcy discharge is issued only to individuals with the intention of providing them with an opportunity to make a new beginning to their financial situation. When the federal bankruptcy court issues the Chapter 7 bankruptcy discharge order it prohibits the creditors from taking any further collection proceedings to reclaim their outstanding amount, wage garnishments, or telephone calls demanding payments. Typically the discharge gets into effect automatically unless some legal proceedings have been initiated against the debtor by the creditors.

While most of the debts get discharged under the Chapter 7 bankruptcy, debts for alimony and child support, certain types of tax claims, loans assured by a governmental unit, debts for fines and penalties, and debts due to improper behavior of the debtor are not discharged. Typically, the discharge order is issued within 60 days following the first meeting of the creditors or four months after the date the debtor files the petition with the bankruptcy court for Chapter 7.

But, there are circumstances wherein the Chapter 7 bankruptcy discharge can be annulled by the court. The court can take measures to cancel the order to discharge the Chapter 7 proceedings if the debtor fails to comply with the orders provided by the law. Any willful attempt from the part of the debtor to produce accurate records of his financial position or provide correct relevant information can lead to the denial of the Chapter 7 bankruptcy discharge by the court.

The discharge can also be revoked when a creditor files an objection for the same before the federal bankruptcy court. The court provides a time frame within which the creditors are to lodge their objection. The court sends a notice to the creditors informing them to file for the lawsuit, known as the adversary proceeding, if any, against the debtor being discharged. The objection must be placed before the court by the creditors within the stipulated time frame beyond which it will stay null and void. The court issues the Chapter 7 bankruptcy discharge order on the expiration of the time fixed for filing a complaint.

Understand and possess a thorough knowledge on how the chapter 7 works or seek professional guidance to prevent unnecessary complications.

Chapter 7 Bankruptcy Dismissal

Chapter 7 bankruptcy or the liquidation bankruptcy as it is otherwise termed provides a new beginning to the debtor in a dire state to make a fresh start. All the non-exempt assets with the debtor are disposed by the trustee appointed by the court and the proceeds distributed between the creditors in the proportion as defined by the law. The whole process begins with the filing of the petition by the debtor to the federal bankruptcy court. There have been numerous instances under which the court has dismissed the Chapter 7 bankruptcy requests placed by the debtor.

The bankruptcy code demands the petitioner to submit the essential documents like the financial statement, schedule of the assets and liabilities, amount due to the various creditors, type of debt and the list of the creditors to name a few to the federal bankruptcy court. The law also demands the petitioner to attend the credit counseling session at least six months before the filing of the request for bankruptcy. Failure from the part of the debtor to comply with any of these clauses result in the Chapter 7 bankruptcy dismissal.

To gain respite through Chapter 7, the petition has to be followed by the payment of the requisite fee from the part of the debtor. The fee includes $245 as the case filing fee, $39 as the miscellaneous administrative fee, and $15 trustee surcharge. The fee is permitted under certain cases to be paid in four installments with the final installment in no later than 120 days after filing the petition. Depending on the circumstances surrounding the case, the debtor may offer an extension of not more than 180 days after the filing of petition for the payment of the last installment. In the absence of the fee remittance, the court will reject the order, demanding the dismissal of the Chapter 7 bankruptcy.

Another cause for the dismissal is when the debtor causes an unreasonable delay with the holdup being prejudicial to the creditors.

Where the court feels that the debts of the debtor are primarily consumer debts, with the granting of relief considered a substantial abuse of the provisions of Chapter 7, it will result in the dismissal of the Chapter 7. The various circumstances surrounding it are mentioned under Section 707 (b).

The court prevents the debtor from filing again for Chapter 7 bankruptcy if the bankruptcy petition submitted within the past 180 days has been dismissed.

Chapter 7 Bankruptcy Eligibility

Chapter 7 bankruptcy can be enjoyed by the debtor only if he satisfies the conditions mentioned by the Code. Failure from the part of the debtor to comply with any of the eligibility elements mentioned in the Code leads to the rejection of the petition by the federal bankruptcy court. Remaining abreast of the Chapter 7 bankruptcy eligibility is inevitable to ensure discharge of the debts by the debtor.

One method of identifying the eligibility of the debtor for Chapter 7 is to compare the average monthly income for the past six months with the median income of the state. The laws related to the bankruptcy can vary with the state of domicile of the debtor. Identify the median income of the state and if the monthly income is less than or equal to the median income of the state, then it makes the debtor an eligible candidate. Another method adopts the mean test to evaluate the eligibility of the debtor for the Chapter 7 bankruptcy. The means test tries to identify the monthly disposable income in the hands of the debtor after meeting the varied obligations permissible by law to the extent agreed by the law. The monthly disposable income or the MDI is calculated after subtracting allowed expenses like food, clothing, transportation, etc. at the amounts defined by the IRS along with the monthly obligations to be made to the secured and priority debts like mortgage, car loan and others from the monthly income. The law permits priority debts like child support, alimony, tax debts, and similar expenses to be set off from the income before coming into the monthly disposable income. Where the MDI is less than $100, the debtor passes the means test, making him eligible for Chapter 7. But, where the MDI falls above $166.66, then Chapter 7 gives way to Chapter 13.

A candidate is not eligible for filing if his case was dismissed within the past 180 days on account of court violation, fraudulent attempts or other reasons as cited by the law.

Identify the rules controlling the Chapter 7 and confirm it with a professional bankruptcy lawyer to ensure one’s eligibility for Chapter 7 bankruptcy.

Chapter 7 Bankruptcy Exempt Assets

Chapter 7 bankruptcy rules require the debtor filing the petition to submit Schedule C giving out the details of property claimed exempt to the federal bankruptcy court, if any. The debtor has to submit the new form that is effective from 4/1/10 along with his petition to protect these assets from being sold and the proceeds distributed to the creditors in proportion as defined by law. Where the debtor provides the court with a no-asset report, then there will not exist any property to be distributed amongst the creditors.

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), offers the debtors ample time to decide on the federal or state laws for exempt property while filing the petition. Many states offer the debtor the choice of selecting from the state's definition of exempt or the federal list of exempt property, while others demand him to employ the state's list. Remain knowledgeable on the laws existing in the state before making the selection to your advantage.

The exempted property list includes the primary residence, with the amount of federal homestead exemption for cases filed after April 1st, 2007 being $20,200.

The Bankruptcy Code exemption is also extended to a car for value as prescribed by various states. This is the value obtained by deducting the value of loan, if any from the market value of the car. Where the car amounts to a tool of trade, then the debtor can apply for exemption even if the equity falls above the exempted limit. The federal bankruptcy law and state laws provide exemptions for household goods and furnishings for a limited amount for each particular item. As much of these goods do not hold any commendable resale value, these assets are not generally employed for meeting the amounts due to the creditors.

Other properties that are exempted from Chapter 7 are the retirement funds under Section 522 (d) (12) of the Bankruptcy Code. These include Individual Retirement Accounts (IRAs), pension, profit sharing and stock bonus plans, certain tax-exempt retirement plans, employee annuities, deferred compensation plans such as your 401 (k) account, and certain trusts.

Make a thorough identification of the federal and state limits and utilize the one that is most profitable.