WHAT IS CHAPTER 7 BANKRUPTCY?
There are two types of Consumer Bankruptcy: Chapter 7 and Chapter 13. Chapter 7 bankruptcy is a process where a debtor files requesting immediate relief from the court from his or her creditors and debts. It is often referred to as the liquidation bankruptcy. At the close of the bankruptcy the debtor is relieved or discharged of most their debts.
QUALIFYING FOR CHAPTER 7
In order for a debtor to qualify to file for Chapter 7 Bankruptcy they must pass what is called the Means Test. In this test, the debtors monthly income for the past six (6) months is measured against the Census Bureau’s Median Family Income Data for in the debtors geographical area (State). If the debtors income is less than the median income they have passed the test. However if their income is greater than the median they must then show that their reasonably necessary expenses are greater than or close their monthly income. A presumption of abuse arises when the debtor fails the means test and does not outright qualify for Chapter 7. The debtor can rebut this presumption with documentation, if they can establish the additional expenses and amounts.
HOW DOES THE CHAPTER 7 BANKRUPTCY PROCESS WORK?
Once it is determined that the debtor qualifies for Bankruptcy. The debtor must complete a credit counseling course. Then, a bankruptcy petition is prepared by an Attorney. The petition contains schedules and statements with the debtors monthly income, expenses, household size, means test evaluation, property, and debts. The petition is filed electronically. Once the petition is filed the debtor is assigned a case number and Trustee who will oversee the bankruptcy case. The debtor must then complete a post filing financial management course. The debtor then receives a 341 Meeting Date. A the 341 Meeting the debtor affirms that they have read and signed the petition as prepared by their Attorney. Approximately sixty to ninety days later the debtor receives their discharge order.
WHAT HAPPENS TO YOU ASSETS IN CHAPTER 7 BANKRUPTCY?
Because Chapter 7 is a liquidation bankruptcy any non-exempt property is liquidated to pay off creditors according to priority. Nonetheless, the debtor has a certain amount property that is exempt from seizure by the Trustee and creditors in bankruptcy. The most common exemption is the Homestead exemption that allows the debtor to have a certain amount of equity in their home. There other exemptions for retirement accounts, vehicles, and other personal property.
FINDING THE RIGHT CHAPTER 7 ATTORNEY
Researching Chapter 7 and knowing the basics of of the law simply is not enough. Bankruptcy Law is complex and the majority of pro se cases (where debtor files their own petition) are dismissed for a number of errors. There are plenty of paralegal services and online legal sites that claim they can assist you filing for bankruptcy. At the end of the day, your name and signature is on petition with an oath swearing that you agree with all the contents. Only an Attorney can provide you with legal advice on your particular case and the implications of filing. The amount of money you save, if any, by going with these services will not be worth the headache of having to deal with issues, errors, and omissions in your bankruptcy petition. Keep in mind you could be charged with Bankruptcy Fraud for concealing information. Hiring a qualified Bankruptcy Attorney is necessary so that you can insure things are done properly and that you are fully informed of the implications of bankruptcy. Potential clients always worry about the fees and finding the right Attorney. Maxwell Law Firm, PLLC offers payment plans and flat reasonable fees for filing for bankruptcy. We also offer discounts for scheduling your appointment online.