Chapter 7 Bankruptcy

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How Chapter 7 Bankruptcy Begins

The first thing that has to happen in a bankruptcy case is the client must complete a financial counseling session from an approved debt counseling company. You may use any company you wish, but we have relationships with some reputable companies in the area that provide these services. This is a requirement under the federal code and is something that must be done regardless of which attorney is hired. The cost is generally between $20 and $45 depending on the company. Once you complete the session, the company will provide you with a certificate of completion and this is required before a bankruptcy petition may be filed on your behalf. Once we have been retained, we will prepare your bankruptcy petition with the federal bankruptcy court. In addition to the petition, the debtor must provide our firm with various financial documents so they may be prepared and submitted to the Trustee. These documents generally include a copy of the tax return or transcripts for the most recent tax year as well as tax returns filed during the case, proof of income (e.g., recent pay stubs or proof of benefits), copies of the deed, recorded mortgage and property tax statement for any real estate owned, bank statements, and copies of any residential or automobile leases. A husband and wife may file a joint petition or individual petitions. Even if filing jointly, a husband and wife are subject to all the document filing requirements of individual debtors.

Filing Fees

The bankruptcy court filing fee for a Chapter 7 bankruptcy case is $306. This is part of our firm’s fee and must be paid by everyone regardless of which firm you choose. This must be collected by our firm to be paid upon filing of the petition. Be careful when you see advertisements for “low-cost” bankruptcies, as they generally do not include these fees.

The Meeting of Creditors (“341 Meeting”)

After we’ve prepared your bankruptcy petition, you will be ordered to appear at the meeting of creditors. This happens because the bankruptcy clerk gives notice of the bankruptcy case to all creditors whose names and addresses are provided by the debtor within the petition we’ve prepared on your behalf. This is generally scheduled between 21 and 40 days after the petition is filed. During this meeting, the trustee puts the debtor under oath, and both the trustee and creditors may ask questions. The debtor must attend the meeting and answer questions regarding the debtor’s financial affairs and property. The debtor must also provide a State-issued identification (usually a license) and their Social Security card (not a copy). If a husband and wife have filed a joint petition, they both must attend the creditors’ meeting and answer questions.

The Chapter 7 Discharge

Receiving a discharge is the goal of a Chapter 7. A discharge releases individual debtors from personal liability for most debts and prevents the creditors owed those debts from taking any collection actions against the debtor. In most cases, unless a party in interest files a complaint objecting to the discharge or a motion to extend the time to object, the bankruptcy court will issue a discharge order relatively early in the case – generally, 60 to 90 days after the date first set for the meeting of creditors. The grounds for denying an individual debtor a discharge in a Chapter 7 bankruptcy case are narrow and are construed against the moving party. The bankruptcy court may deny the debtor a discharge if it finds that the debtor: failed to keep or produce adequate books or financial records; failed to explain satisfactorily any loss of assets; committed a bankruptcy crime such as perjury; failed to obey a lawful order of the bankruptcy court; fraudulently transferred, concealed, or destroyed property that would have become property of the estate; or failed to complete an approved instructional course concerning financial management.

In many situations, a debtor wishes to keep certain secured property (such as an automobile), he or she may decide to “reaffirm” the debt. A reaffirmation is an agreement between the debtor and the creditor that the debtor will remain liable and will pay all or a portion of the money owed, even though the debt would otherwise be discharged in the bankruptcy. In return, the creditor promises that it will not repossess or take back the automobile or other property so long as the debtor continues to pay the debt.