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The following article was published in our article directory on June 14, 2012.
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Chapter 7 Bankruptcy and How It Functions

Article Category: Advice

Author Name: Damon Day

A chapter 7 case gets going by having the consumer filing a petition with the bankruptcy court serving the area where the debtor lives or where the business debtor is organized or has its principal place of business or principal assets. In addition to the petition, the debtor needs to additionally submit with the court: schedules of assets and liabilities; a detailed report of current earnings and outlays; a statement of financial affairs; and a schedule of executory contracts and unexpired leases.

Debtors need to also supply the assigned case trustee with a photocopy of the tax return or transcripts for the most recent tax year as well as tax returns filed during the case (including tax returns for preceding years that had not been filed when the case commenced).

Individual consumers with mostly consumer debts have extra document filing demands. They must file: a certificate of credit counseling and a copy of any debt pay back plan developed through credit counseling; proof of payment from employers, if any, received 60 days before filing; a statement of monthly net income and any anticipated rise in earnings or expenses after filing; and a document of any interest the debtor has in federal or state qualified education or tuition accounts. A husband and wife may file a joint petition or individual petitions.

Even if filing jointly, a husband and wife are subject to everyone of the document filing prerequisites of individual debtors.

The courts need to levy a $ 245 case filing fee, a $ 46 assorted administrative fee, and a $ 15 trustee additional charge. Customarily, the fees must be presented to the clerk of the court upon filing. With the court's permission, however, individual debtors may pay in installments.

The number of periodic payments is limited to four, and the debtor must make the final installment no later than 120 days right after filing the petition.

For cause revealed, the court may draw out the time of any scheduled payment, provided that the last installment is remitted not later than 180 days after filing the petition. The debtor may also pay the $ 46 administrative expense and the $ 15 trustee additional charge in installments. If a joint petition is registered, only one filing fee, one administrative fee, and one trustee additional charge are charged. Debtors should be aware that failing to remit these costs may well result in dismissal of the case.

If the debtor's income is less than 150 % of the poverty level (as defined in the Bankruptcy Code), and the debtor is not capable to pay the chapter 7 fees even in installments, the court may waive the demand that the fees be paid.

In order to finish the Official Bankruptcy Forms that make up the petition, statement of financial affairs, and schedules, the debtor must provide the following information:

* A list of all lenders and the sum and makeup of their claims;
* The source, amount, and frequency of the debtor's salary;
* A list of all of the debtor's property; and
* A detailed list of the debtor's monthly living expenses, i.e., food stuff, clothes, shelter, utilities, taxes, transportation, medication, etc.

Married individuals need to bring together this critical info for their partner regardless of whether they are filing a joint petition, separate individual petitions, or even if only one spouse is filing. In a situation where only one spouse files bankruptcy, the wages and expenses of the non-filing spouse are mandated so that the court, the trustee and creditors can review the household's fiscal position.

In connection with the schedules that an individual debtor will file is a listing of "exempt" property. The Bankruptcy Code allows an individual debtor to guard some property from the claims of creditors because it is protected under federal bankruptcy ordinance or part of the laws of the debtor's home state.

A number of states have actually taken advantage of a provision in the Bankruptcy Code which lets each state to choose its own exemption law in place of the federal exemptions. In other jurisdictions, the individual consumer has the selection of choosing between a federal offer of exemptions or the exemptions provided under state law. Therefore, no matter if certain property is exempt and could be held by the debtor is typically a point of state law. The debtor should certainly consult a lawyer to check the exemptions available in the state precisely where the debtor lives.

Filing a petition under chapter 7 "automatically stays" (ceases) most collection acts against the debtor or the debtor's property.

Yet filing the petition does not stay certain types of actions and the stay may be effective only for a short time in some situations. The stay occurs by operation of law and requires no judicial action. As long as the stay is in effect, creditors basically may not initiate or continue lawsuits, wage garnishments, or even telephone calls wanting payments. The bankruptcy clerk gives notice of the bankruptcy case to all bankers whose names and addresses are produced by the debtor.

Between 21 and 40 days following the petition is filed, the case trustee will definitely have a meeting of creditors. If the U.S. trustee or bankruptcy administrator organizes the meeting at a place that does not have regular U.S. trustee or bankruptcy administrator staffing, the gathering may be held no more than 60 days after the order for relief.

Throughout this meeting, the trustee puts the debtor under oath, and both the trustee and creditors may ask questions. The borrower must definitely attend the meeting and answer concerns regarding the debtor's financial affairs and property.

If a husband and wife have filed a joint petition, they both must attend the creditors' meeting and answer questions. Within 10 days of the creditors' meeting, the U.S. trustee will publish to the court whether the case should be presumed to be an abuse under the means test.

It is important for the borrower to cooperate with the trustee and to provide any personal registers or instruments that the trustee demands. The Bankruptcy Code calls for the trustee to ask the debtor questions at the meeting of creditors to ensure that the debtor is aware of the potential consequences of seeking a discharge in bankruptcy such as the effect on credit record, the potential to file a petition under a different chapter, the outcome of bing given a discharge, and the side effect of renewing a debt. Some trustees provide written help and advice on these issues at or before the meeting to ensure that the debtor is aware of this info. In order to conserve their independent judgment, bankruptcy judges are banned from attending the meeting of creditors.

In order to give the debtor full relief, the Bankruptcy Code allows the debtor to convert a chapter 7 case to a case under chapter 11, 12, or 13 as long as the debtor is entitled to be a debtor under the new chapter. Having said that, a condition of the debtor's voluntary conversion is that the case has not previously been switched to chapter 7 from another chapter.

Thus, the debtor will certainly not be enabled to convert the case repeatedly from one chapter to another.

Keywords: bankruptcy,chapter 7 bankruptcy,filing chapter 7 bankruptcy,chapter 7 bankruptcy lawyers

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