What Does Filing Involve
The process of filing Chapter 7 bankruptcy generally takes 80 to 100 days from filing to when your debts are discharged. Youre not required to hire an attorney, but it is recommended that you go through this process with professional guidance from an attorney.
Here are some of the things you should be prepared to do during a Chapter 7 bankruptcy.
How To File A Petition For Bankruptcy
In six months, you can go through the usual bankruptcy procedure. Here are some of the steps that you must complete to have a successful bankruptcy proceeding.
- Hire a credible bankruptcy attorney. If you are struggling with debt and financial problems, consulting a trusted local attorney is highly advisable. Competent bankruptcy attorneys will help you understand the bankruptcy rules for each chapter and help you decide which will be the right option for you and advise you on the correct procedure of filing bankruptcy. Doing so prevents dismissal of your bankruptcy case, which can result from simple misstep such as failure to provide all the required paperwork.
- Undergo credit counseling. Before declaring bankruptcy, you should have completed counseling with a certified nonprofit credit counseling provider.
- Prepare all the necessary forms and supporting documents. Your attorney will assist you throughout the entire bankruptcy proceeding. Although it is your responsibility to gather all the necessary documents related to your debts, personal property, monthly income, and expenditure, he or she can check if they are complete.
- Work with your bankruptcy trustee. The court will assign a trustee that will evaluate your bankruptcy case and determine your eligibility. After evaluating the required documents, bankruptcy trustees will confirm if filers are qualified for Chapter 7. He or she will also manage the transactions between you and any creditor concerned.
How To File Chapter 7 Bankruptcy
Collect your financial documents. If you’re employed, this usually just means getting your recent pay stubs and the last two years of your income tax returns. It’s also a good idea to get your recent bank statements and credit report.
Fill out the bankruptcy forms. These forms are known as your bankruptcy petition. They include questions about what you earn, spend, own, and owe. People choose to either hire a lawyer to complete these forms for them or they fill them our on their own. Theyâre available on the U.S. Courts website.
Take a credit counseling course. This is a 60-minute course that you can do online with any qualified nonprofit credit counseling agency. Youâll get a certificate of completion that you submit to the court.
File your bankruptcy forms with the bankruptcy court. Youâll do this by mail, in-person, or online if your court allows it. If you have a lawyer, theyâll file the forms for you. At this point, 80% of your work is done. But youâll need to complete a few post-filing tasks.
Mail your trustee the required documents. Youâll be assigned a trustee from the bankruptcy court. This isnât a judge, but they still oversee your case. Theyâll likely require you to email or mail them the same documents you filed with the court and may have other requests, such as bank statements.
Get your discharge letter. This happens about 2-3 months after your 341 meeting if everything goes to plan. Congratulations.
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What About Side Hustle Income Or Part
Income from all sources must be included when calculating a Chapter 13 plan payment. Therefore, if you have a part-time job of any type, you are required to report that income to the Chapter 13 trustee. That includes income from a side job that you begin after your Chapter 13 case is filed.
If you intend to take a part-time job for a few months to earn an extra month for Christmas or to purchase school clothes for your children, talk with your bankruptcy attorney. Your Chapter 13 plan may not need to be amended unless you earn significant income or continue the job more than a few months
Your Property In Chapter 7 Bankruptcy
You probably read about the Chapter 7 bankruptcy trustee taking control of your property and immediately felt your chest clench in anticipation and anxiety. In the words of Douglas Adams, dont panic. In fact, most people who file Chapter 7 bankruptcy get to keep all of their personal belongings.
The reason for this is simple. If youre going to be filing for bankruptcy then youre going to want to have a good lawyer working with you. That lawyers going to be able to tell you if youd lose something in a Chapter 7 if so, chances are pretty good that youll either decide against bankruptcy or file a Chapter 13 instead.
See? Its a self-fulfilling prophesy.
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Getting A Lawyer To Help You With Your Bankruptcy
Bankruptcy is a specialized area of law that is very complex. And the issues are not always apparent or simple. The bankruptcy laws changed in October 2005 to discourage many people from filing for bankruptcy. So the law became more complicated. And there are more situations where a mistake can result in your case getting dismissed. If your case is dismissed, the bankruptcy court often imposes a penalty of 180 days before you can refile, and in this time period a lot can happen. This is why it is so important to have a lawyer advise you and help you with your bankruptcy.
Find a lawyer who can help you work through the issues, alternatives you may have, and consequences of your choices.
- Pick a lawyer with whom you are comfortable, one who will allow you to ask questions and give you responses that you can understand.
- Pick a lawyer who either specializes in bankruptcy or does a large part of his or her practice in the field.
- Ask questions until you understand what your choices are.
- Don’t be afraid to interview a lawyer and leave without hiring him or her.
If you decide to represent yourself in bankruptcy court, read a guide for Filing for Bankruptcy Without an Attorney.
To find a good bankruptcy lawyer:
- Check state bar groups and specialization/certification programs for bankruptcy lawyers in your community.
- Ask other lawyers or tax preparers you know for recommendations.
Understanding Chapter 7 Trustee Notices
In a Chapter 7 case, the trustee calls the shots. Your case can remain open for months or years if your Chapter 7 trustee decides to take their time to investigate certain legal issues or to sell assets. However, in most cases, the Chapter 7 trustee simply wants to wrap up these cases where there is no money to be made for creditors. When this happens, the trustee will file a notice of abandonment of your assets, meaning that they are legally handing the assets back to you because they are not going to sell any of your assets. The trustee will also file a notice of no assets, which tells the bankruptcy court and all of your creditors that the trustee has located no assets to sell to make money to pay your creditors. Note that, however, unless and until the trustee abandons back your assets and tells the bankruptcy court that it hasnt located any assets to sell, your case will remain open.
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How Does Extra Income Work In A Chapter 13 Bankruptcy
- How Does Extra Income Work in a Chapter 13 Bankruptcy?
Your household income is a significant factor used to calculate your Chapter 13 plan payment. For many individuals, their sole source of income is employment. Therefore, their Chapter 13 plan payments are based on their income, expenses, debts, and other factors. However, if you have income from other sources, that income could impact the amount of your Chapter 13 bankruptcy payment.
Lets discuss some of the most common questions about extra income in a Chapter 13 bankruptcy.
Alternatives To Chapter 7
Debtors should be aware that there are several alternatives to chapter 7 relief. For example, debtors who are engaged in business, including corporations, partnerships, and sole proprietorships, may prefer to remain in business and avoid liquidation. Such debtors should consider filing a petition under chapter 11 of the Bankruptcy Code. Under chapter 11, the debtor may seek an adjustment of debts, either by reducing the debt or by extending the time for repayment, or may seek a more comprehensive reorganization. Sole proprietorships may also be eligible for relief under chapter 13 of the Bankruptcy Code.
In addition, individual debtors who have regular income may seek an adjustment of debts under chapter 13 of the Bankruptcy Code. A particular advantage of chapter 13 is that it provides individual debtors with an opportunity to save their homes from foreclosure by allowing them to “catch up” past due payments through a payment plan. Moreover, the court may dismiss a chapter 7 case filed by an individual whose debts are primarily consumer rather than business debts if the court finds that the granting of relief would be an abuse of chapter 7. 11 U.S.C. § 707.
Debtors should also be aware that out-of-court agreements with creditors or debt counseling services may provide an alternative to a bankruptcy filing.
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What Is Chapter 7 How Does It Work
In a Chapter 7 bankruptcy, youâll fill out forms about what you earn, spend, own, and owe and submit these forms to the bankruptcy court. Youâll also submit recent tax returns and pay stubs, if youâre employed.
A trustee, who is an official assigned to your case, will review your forms and documents. Youâll have a brief meeting with them, where theyâll ask you basic questions about whatâs in your forms.
A couple of months later, youâll get a notice in the mail from the court making your bankruptcy discharge official. The vast majority of people who are honest, fully fill out their bankruptcy forms, and complete the required steps get their bankruptcy accepted by the court.
Qualifying For A Chapter 7 Bankruptcy Filing
Not everyone is eligible for a Chapter 7 debt discharge. You must take and pass the “means test” to qualify for Chapter 7 bankruptcy. If your income is lower than the state’s median income for a family the same size as yours, you automatically pass the means test. If your income is over the state median, you’ll get another chance to pass by subtracting your expenses. If you don’t have enough left over to make a meaningful payment to your creditors through a three- to five-year Chapter 13 repayment plan, you’ll qualify for Chapter 7. Find out which expenses will help you pass the means test.
Keep in mind that even if you qualify, the court will still evaluate whether you have significantly more income than you need to pay your monthly bills. The court will compare the figures on Schedule I: Your Income to those on Schedule J: Your Expenses to determine whether enough remains to make a meaningful payment to creditors.
Example. Suppose you make $5,000 per month, but your monthly budget shows you need only $4,500 per month. The court might order you to pay $500 per month through a Chapter 13 repayment plan, even if you qualify for Chapter 7.
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Discharging Debts In Bankruptcy
A bankruptcy discharge releases a debtor from being personally responsible for certain types of debts. So, after a bankruptcy discharge, the debtor is no longer legally required to pay any debts that are discharged.
The discharge prohibits the creditors of the debtor from collecting on the debts that have been discharged. This means that creditors have to stop all legal action, telephone calls, letters, and other type of contact with the debtor. This prohibition is permanent for the debts that have been discharged by the bankruptcy court.
You cannot discharge all debts in bankruptcy. Some of the most common debts that you cannot get rid of in bankruptcy are debts from child or spousal support, most student loans, most tax debts, wages you owe people who worked for you, damages for personal injury you caused when driving while intoxicated, debts to government agencies for fines or penalties, and more.
The Minnesota Section 341 Meeting Defined
After filing for Chapter 7 Bankruptcy, the bankruptcy court sends notice to you and your creditors of an upcoming Section 341 bankruptcy hearing. It is called a first meeting of creditors or a Section 341 meeting because it refers to Section 341 of the Bankruptcy Code which requires a hearing to take place.
The notice sent by the court notifies debtor and debtorâs creditors who has been assigned by the US Trusteeâs office to administer the bankruptcy estate. This person is called a trustee and is typically a person who is a lawyer who has met the requirements to be impaneled as a Chapter 7 trustee. Typically, when Chapter 7 cases are filed with the court, the court assigns a trustee to the case until her calendar is full for a particular hearing date and then another trustee is assigned to fill a hearing date and so forth.
The notice sent by the court also designates a date and time for the Section 341 hearing. Typically, these hearings take place in-person .
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After Filing: Attend Personal Financial Management Counseling
Before receiving a bankruptcy discharge, you must attend a course about financial management with an agency approved by the U.S. Trustee’s office. This is different from the credit counseling course you attended before filing.
You will receive a certificate to file with the bankruptcy court upon completion. This requirement is necessary for the fulfillment of bankruptcy.
Heres How Chapter 7 Works
Chapter 7 bankruptcy is a liquidation of assets. This aspect of Chapter 7 scares many people, but it should not. Many people believe that they will have to give up everything they own. In reality, this rarely happens. You will be able to keep the majority of your property, including your car and your home in some circumstances.
At Rothschild & Ausbrooks, PLLC, our lawyers take pride in getting to know the people we represent. We will learn about your situation and provide you with information on exactly how Chapter 7 bankruptcy will affect your life. In most cases, the biggest impact is just what you would expect it to be: the elimination of debt.
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What Is Chapter 13 Bankruptcy
Chapter 13 bankruptcy is a way to reorganize your debt. It involves repaying none, some or all of your debt over the course of three to five years. One important difference between Chapter 13 and Chapter 7 bankruptcy is that in Chapter 13, your debts arent discharged and youre still liable to pay them.
With Chapter 13, most or all of your creditors are lumped together into one large pool. You then make payments each month to a lawyer called a trustee whos assigned to your case. The trustee distributes your payment to the creditors.
In Chapter 13, you can reduce the amount owed on secured loans, reduce interest rates, re-amortize loans for a lower monthly payment, remove certain liens, extend the time to pay back taxes, reduce the amount owed on unsecured loans sometimes down to zero and legally break leases, says bankruptcy attorney Dai Rosenblum of Butler, Pa. Because a Chapter 13 filing can extend up to five years, Rosenblum says many people use it to catch up on their mortgage.
When you proceed with a Chapter 13 case, you must file a plan detailing how some, or all, of the debts will be repaid over time. In addition, you or your attorney, in conjunction with the trustee for your case, will determine a reasonable amount that you can afford to pay back to creditors. That amount is based on your assets, monthly income and monthly expenses.
Speak To An Experienced Chapter 7 Bankruptcy Attorney Today
This article is intended to be helpful and informative. But even common legal matters can become complex and stressful. A qualified chapter 7 bankruptcy lawyer can address your particular legal needs, explain the law, and represent you in court. Take the first step now and contact a local chapter 7 bankruptcy attorney to discuss your specific legal situation.
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The Role Of The Bankruptcy Judge
As a petition moves through the system, a judge will make binding decisions when questions or disputes arise. These questions might concern eligibility or the classification of an asset as exempt or nonexempt. Typically, a debtor has almost no interaction with a judge on a Chapter 7 case, but the filer could get debts discharged in as little as four months. If a debtor’s case passes review, a judge will grant a discharge of certain unsecured debts.