Bankruptcy Simplified

Preparing to File Bankruptcy | Bankruptcy Administration | Bankruptcy Estate

Automatic Stay | Discharge | Types of Bankruptcy | Pending Foreclosures

CHAPTER 7 BANKRUPTCY
Who Can File a Chapter 7 Bankruptcy?
Are You Eligible to File a Chapter 7 Bankruptcy?
Chapter 7 Bankruptcy Process
Chapter 7 Discharge
Chapter 7 Time Frame

CHAPTER 13 BANKRUPTCY
Who Can File a Chapter 13 Bankruptcy?
Are you Eligible to File a Chapter 13 Bankruptcy?
Chapter 13 Bankruptcy Process
Chapter 13 Discharge
Chapter 13 Time Frame

Bankruptcy Law

Bankruptcy Law is legal relief for persons in financial distress. It gives individuals and / or businesses a fresh start by eliminating and or reorganizing debts. It can be the first step to financial recovery. Back to top

Preparing to File Bankruptcy

The Bankruptcy Abuse and Prevention Act of 2005 (BAPCPA) requires that each individual take an approved Credit Counseling Course in order to file bankruptcy, and an approved Financial Management course in order to receive a discharge. No individual may be a debtor under any chapter of the Bankruptcy Code unless he or she has, within 180 days before filing, received credit counseling from an approved credit counseling agency.

In order to complete the Official Bankruptcy Forms that make up the petition, statement of financial affairs, and schedules, the individual / business must compile the following information (more information may be needed):

1. A list of all creditors and the amounts and nature of their claims;

2. The source, amount, and frequency of the debtor's income;

3. A list of all of the debtor's property; and

4. A detailed list of the debtor's monthly living expenses (food, clothing, mortgage / rent, utilities, taxes, transportation, insurance, childcare expenses etc.)

It is important to list all your property and debts in your bankruptcy schedules.
Back to top

Bankruptcy Administration

When an individual files bankruptcy, an impartial trustee is appointed to administer the case. Once a Trustee has been assigned to the case, Individual Debtors are required to submit the following documents to the trustee (more documents may be required):

1. a copy of the tax return or transcripts for the most recent tax year

2. a certificate of credit counseling

3. evidence of payment from employers, if any, received 60 days before filing Back to top

Bankrutpcy Estate

Commencement of a bankruptcy case creates an "estate." The estate technically becomes the temporary legal owner of all the debtor's property. While the bankruptcy laws vary from state to state, every state has exemptions that protect certain assets (, such as your house, your car, money in qualified retirement account, household goods, etc) up to a certain value. Based on the laws of the State in which the debtor resides, the Trustee will make a determination of exempt and non-exempt assets.
Back to top

Automatic Stay

Filing a bankruptcy petition, "automatically stays" (stops) most collection actions against the debtor or the debtor's property. As long as the stay is in effect, creditors generally may not initiate or continue lawsuits, garnishments, or harassing telephone calls. The bankruptcy clerk gives notice of the bankruptcy case to all creditors whose names and addresses are provided by the debtor. Back to top

Discharge

One of the primary purposes of bankruptcy is to discharge eligible debts to give a Debtor a "fresh start." The Debtor has no personal liability for discharged debts. However, a discharge does not extinguish a lien on property. Generally you can not discharge debts for most taxes, child support, alimony, most student loan, and court fines. Discharges only apply to debts that arise before the date of filing. The Court could deny a discharge if you do something dishonest in connection with your bankruptcy case, such as destroy or hide property or falsify records. Back to top

Types of Bankruptcy

Types of Bankruptcy include Chapter 7, Chapter 13, Chapter 11 (use mostly by businesses), and Chapter 12 (for family farmers / family fishermen). An individual / business can choose the type of bankruptcy that best meets their needs provided that the individual / business meets the requirements. Back to top

Pending Foreclosures

Individuals may use a bankruptcy proceeding to save their home from foreclosure. The automatic stay temporarily stops the foreclosure proceeding as soon as you file bankruptcy. Under a Chapter 13 bankruptcy, the repayment plan allows the Debtor to bring the past-due payments current while the Debtor continues to make the regular mortgage payments that come due after the chapter 13 filing. Back to top

Your bankruptcy may be reported on your credit record for as long as ten years. However you can begin rebuilding your credit immediately. Back to top

CHAPTER 7 BANKRUPTCY

Chapter 7 of the Bankruptcy Code, also known as Straight Liquidation, is the most common type of bankruptcy filed.

Who can file Chapter 7 Bankruptcy?

An individual and/or a business can file a Chapter 7 Bankruptcy. Back to top

Are you eligible to file a Chapter 7 Bankruptcy?

A two part test is applied to determine if an individual qualifies for a Chapter 7 bankruptcy:

Part 1 of the Bankruptcy Means Test: Checks to see if the monthly average of your last 6 months gross income is below the median income for your state.

Part 2 of the Bankruptcy Means Test: If your income is slightly higher than your state's median income you may still be able to file Chapter 7. Your bankruptcy attorney will be able to make this calculation and advise you accordingly.
Businesses are not required to pass the means test for Chapter 7 eligibility. Back to top

Chapter 7 Bankruptcy Process

Chapter 7 Debtors will attend a hearing called a 341 Meeting of Creditors. This is a public hearing and anyone can attend including creditors who are interested in the proceeding. In most cases, no creditors appear at the 341 Meeting of Creditors.

A typical hearing may last anywhere between 7 and 15 minutes (please note that cases with complications, may take longer). At the hearing, the Trustee asks the debtor questions pertaining to the petition and schedules submitted to the Court.

The trustee will evaluate the assets as listed in the schedules and testified to at the 341 Meeting of Creditors. Where non-exempt assets exist in a chapter 7 case, the trustee’s role is to liquidate the debtor's nonexempt assets in a manner that maximizes the return to the debtor's unsecured creditors. In the majority of cases, people pass through a bankruptcy and keep everything they own. Back to top

Chapter 7 Discharge

In a chapter 7 case, a discharge is only available to individual debtors, not to partnerships or corporations. Although an individual chapter 7 case usually results in a discharge of debts, the right to a discharge is not absolute, and some types of debts are not discharged. Moreover, a bankruptcy discharge does not extinguish a lien on property. Back to top

Chapter 7 Time Frame

A chapter 7 takes approximately 90 to 120 days from the date of filing to the date of discharge and closure of the case. Back to top

What is a Reaffirmation Agreement

You may have special reasons that you would like to retain a debt that could have been discharged through your bankruptcy. For example, you may want to work out a plan to keep your vehicle with the auto lender. A reaffirmation agreement is an agreement filed with the Bankruptcy Court promising to pay the creditor.

Reaffirmation Agreements are completely voluntary. However, they should not place too heavy a burden on you and your family, and they must be in your best interest. The agreement can be cancelled within 60 days after the agreement is filed with the court or anytime before your case is dismissed whichever gives you more time.

If you reaffirm a debt and then fail to pay it, you owe that debt the same as if there were no bankruptcy. The debt will not be discharged, and the creditor can take action to recover any property on which it has a lien or mortgage. The creditor could also take legal action to recover a judgment against you. Back to top

CHAPTER 13 BANKRUPTCY

A chapter 13 bankruptcy is also called a Reorganization Plan. It is an option for individuals who have predictable income and whose income is sufficient to pay their reasonable expenses with some amount left over to pay off their debts. It enables individuals with regular income to develop a plan to repay all or part of their debts. Under this chapter, debtors propose a repayment plan to make installments to creditors over three to five years. Back to top

Who Can File a Chapter 13 Bankruptcy?

Individuals only. A corporation / partnership is not be eligible to file Chapter 13 Bankruptcy. Business would file Chapter 11 to reorganize its debts. Back to top

Are You Eligible to File a Chapter 13 Bankruptcy?

An individual is eligible for chapter 13 bankruptcy relief as long as the individual's unsecured debts are less than $336,900 and secured debts are less than $1,010,650 (these amounts may be adjusted periodically). If the debts exceed the allowed amount, an individual would need to file a Chapter 11 bankruptcy in order to reorganize his/her debts. Back to top

Chapter 13 Bankruptcy Process

Chapter 13 Debtors will attend a 341 meeting of creditors and a confirmation hearing.

These are public hearings and anyone can attend including creditors who are interested in the proceeding. In most cases, no creditors appear at the Chapter 13 341 Meeting of Creditors.

A typical Chapter 13 hearing 341 Meeting of Creditors may last anywhere between 15 and 30 minutes. The Trustee conducts the hearings and asks the Debtor questions pertaining to the petition and schedules.

The Trustee will evaluate the case and file objections to Confirmation. You and your attorney will work together to cure (fix) any objections that the Trustee may file. Your attorney will file the modified schedules in order to seek confirmation of your case. If you fail to cure all of the Trustee’s objections, your Chapter 13 case may be dismissed.

Upon confirmation, the Chapter 13 trustee serves as a disbursing agent. He collects payments from the debtor and making distributions to creditors. Plan payments commence 30 days after filing a Chapter 13 bankruptcy. Back to top

Chapter 13 Discharge

After completion of the plan payments, the Chapter 13 Debtor receives a discharge of all remaining dischargeable debts. Back to top

Chapter 13 Time Frame

A Chapter 13 case will last anywhere between 36 and 60 months, but in no case may a plan exceed a 60 month time frame. Back to top

If the debtor's current monthly income is greater than the applicable state median, the plan generally must be for five years.

During this time the law forbids creditors from starting or continuing collection efforts.
Back to top

This site gives you some general information about what happens in a bankruptcy case. This information is for information purposes only. If you need specific advice concerning your particular circumstances, you should seek legal advice. Find an attorney in your area.