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CHAPTER 7

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Chapter 7 Bankruptcy

The following is a brief overview of a Chapter 7 bankruptcy. You are strongly advised to consult with an attorney to get a more detailed explanation of the bankruptcy process and what it can and cannot accomplish for you. Each person's situation is unique and requires personalized advice. Also bankruptcy and related laws change, as do court rulings, so the information on this website should not be relied upon.

A Chapter 7 bankruptcy, sometimes referred to as a liquidation bankruptcy, is what most people think of as bankruptcy. It is the type of bankruptcy where debtors (the people who file bankruptcy) literally wipe out their debts, with certain exceptions. Some of those exceptions are:

  • Income taxes that are less than 3 years old
  • Alimony and Child Support
  • Student Loans
  • Debts that were incurred by fraudulent means
  • Post petition Home Owners Association Fees, Condominium Fees, Cooperative Fees
  • Cash advances of $875 or more taken within 70 days before filing bankruptcy
  • Luxury item purchases of $600 or more within 90 days before filing bankruptcy
  • Retirement plan loans

There are more debts that cannot be discharged so be sure to discuss any questions you have about these types of debts with your attorney.

KEEPING MY PROPERTY
A big concern that people have who are contemplating bankruptcy is they are concerned that they will lose their assets, like cars, furniture, bank accounts etc. There are certain types or amounts of assets that can be protected when someone files for bankruptcy. The debtors get to use what are called "exemptions" to protect and thus keep some, if not all of their assets. In order to keep assets, a debtor's attorney must go through, what can be at times, a complicated analysis of the debtors' assets and a time line of the debtors' residences for the two year period prior to filing the bankruptcy. Once the attorney has completed this analysis, the debtor can be advised which assets can be exempted and which could be lost if the bankruptcy were to be filed.

PROVIDING INFORMATION TO THE ATTORNEY
In order for the debtors' attorney to be able to properly advise a client and prepare all the required documents that need to be filed for a bankruptcy, the debtors need to provide the attorney lots of information.

  • The debtors need to provide a list of their debts, including names, addresses, account numbers and amounts owed to their creditors (the people and businesses that are owed money).
  • There also has to be disclosed by the debtors to the attorney, a list of their assets and their respective values.
  • Debtors need to provide proof of their income, such as  pay stubs, for the 6 months prior to filling the bankruptcy, as well as the most recently filed income tax returns.
  • Also, debtors need to provide a comprehensive monthly budget of their expenses and answer questions about their financial affairs.

There is other documentation the debtors need to provide and the attorney can review those requirements with the debtors.

Before a personal bankruptcy can be filed, debtors have to complete a credit counseling certification with an approved credit counseling organization. That organization must provide a certificate of completion to the debtors' attorney so it can be filed with the bankruptcy court.

FIRST MEETING OF CREDITORS
Once the bankruptcy is actually filed with the bankruptcy court, a hearing gets scheduled before the interim trustee that has been appointed to oversee that case. This hearing is known as the first meeting of creditors or the 341 hearing. If the debtor fails to attend that hearing, then the trustee can certify the case for dismissal. The hearing is fairly straight forward and there is a set of questions the interim trustee will ask each debtor. It is also an opportunity for creditors to ask questions of the debtor about their bankruptcy filing.  Assuming there are no issues that come up during that hearing, then that should be the last time the debtor has any contact with the interim trustee.

The debtor also has another requirement besides attending the first meeting of creditors and that is to complete a debtor education course. That course is given by approved providers who will issue certificates of completion once the debtor has successfully taken the class. This class must be completed and the certificate filed within 60 days of the first meeting of creditors. If this is not done, then the debtor will not get a discharge.

DISCHARGE OF DEBTS
Once the debtor has attending the first meeting of creditors and complied with all the requirements and no one has raised any issues or objections, then the debtors will receive their discharges. That normally occurs about two to three months following the first meeting of creditors. The debtors will then have received their fresh start, eliminating  their dischargeable debts and kept their exempt assets.

 

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The materials on this website are not intended as legal advice but only informational. For any legal questions or matters you may have, you should consult with your own attorney as no attorney client relationship is formed between you and The Lilly Law Group, PC by you visiting this website. Also, any information you provide by visiting this website is not confidential and The Lilly Law Group, PC may represent a party that is adverse to you. The Lilly Law Group, PC's attorneys are only licensed to practice law in Virginia and the District of Columbia .
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