How does Chapter 7 Bankruptcy Work?

Chapter 7 bankruptcy in New York

Definition
A Chapter 7 bankruptcy is a court proceeding where a debtor files a petition in a bankruptcy court asking for immediate relief from his creditors and from his debts.  It is also referred to as a liquidation bankruptcy.  At the end of a Chapter 7 proceeding, the debtor is discharged of most of his debts.
Qualifications for Chapter 7
A debtor who wants to file a Chapter 7 petition must pass the Means Test.  The debtor’s monthly income from the six months immediately prior to filing the petition will be measured against the Median Family Income in New York.  If the debtor’s income is less than the median income, he is qualified for relief under Chapter 7.  When his income is greater than the median, the presumption of abuse arises and the debtor will fail to qualify for relief under Chapter 7 (Means Test).  This presumption can be rebutting by showing proof that the the debtor’s expenses fall well below their necessary expenses.

Procedure in Chapter 7 bankruptcy
Once the debtor qualifies for a Chapter 7 proceeding, he must first complete a credit counseling course and then file a bankruptcy petition prepared by his attorney.  The petition is filed electronically and the debtor will be assigned a case number as well as a Trustee who will oversee the bankruptcy case. The debtor will then have to complete a financial management course.  After this, the Trustee will set a 341 Meeting with his creditors. Sixty to ninety days after the meeting, the debtor will receive his discharge order.

Effects on the assets of the debtor under a Chapter 7 case
All the non-exempt properties of the debtor will be liquidated by the Trustee to pay off his creditors who will be listed in order of their priority.  The debtor can retain some of his property which is exempt from seizure by the Trustee and the creditors.  Generally, a debtor’s home, retirement account, recent wages, vehicles and tools of his trade are exempt from liquidation.

Necessity of having a Bankruptcy attorney
Bankruptcy is complicated.  It is possible for debtors to file a pro se petition where they represent themselves but doing this is quite risky. For one, in filing a bankruptcy petition, you swear that the information you gave is accurate and complete.  At the very least, your petition may be dismissed.  At the worst, you could be charged with perjury or bankruptcy fraud for concealing information from the bankruptcy court.  You need a qualified and competent Bankruptcy Attorney to give you advice, to help you prepare your petition and to explain to you the implications of filing a bankruptcy petition.

We at the Maxwell Law Firm, PLLC assist client debt settlement, foreclosure defense, tax collection defense, filing for chapter 7 and chapter 13 bankruptcy and mortgage home loan modifications in New York. Contact us and speak to our competent and experienced New York Bankruptcy Attorney so that you can get the debt relief you are seeking. Please give us a call at 718-701-0095 to discuss your options.