CHAPTER 7 BANKRUPTCY: A “FRESH START”

What is a Chapter 7 bankruptcy?
A chapter 7 bankruptcy allows people who are unable to pay their existing debts, to have such debt eliminated. Why file a Chapter 7 bankruptcy? To eliminate creditor harassment, to stop wage garnishment, and to prevent or eliminate the debt left over from repossession or foreclosure.

After successful completion of bankruptcy, you receive a discharge of your debt (simply stated, your debts are wiped out and you will no longer be held responsible).

What is a Chapter 7 trustee?
He or she is an attorney assigned by the court to, first of all, determine the truthfulness of your bankruptcy petition ( document filed with court ) and to make a determination if you have any assets which may be seized for the benefit of your creditors. This is based on laws called exemptions. In many cases, most common property is exempt and will not be lost in bankruptcy. Some sample assets “exempt” are listed below ( these are based on New York Law)

THE PROCESS OF FILING BANKRUPTCY
FOR A CHAPTER 7

After the hiring of our office
We order a credit report on you to assist you in knowing what you owe. In addition we give you a booklet of information we require to prepare your bankruptcy. Once all information is provided by you and we are paid in full, we prepare the Bankruptcy for your signature. The Bankruptcy is then filed, in most cases, electronically with the court. By filing your case electronically we can give you the case number of your case within 24 hours of the signing.

The court process
The length of time you're within Bankruptcy court protection usually lasts between 3-5 months, depending upon how busy the court is. The length of time before you go to court, and the closing of the case, has no effect on you. The moment we file your petition, all collection activity must cease against you. What this means is that any bank accounts you have may not be seized, no wages may be garnished, and any asset seizures or garnishees in effect as of the date of filing the petition must stop immediately.

You will receive a notice for the meeting of creditors, which is usually held 25 to 35 days after the filing of your bankruptcy petition. This is the opportunity for the lawyer appointed by the court to examine your case under oath and for any of your creditors to ask you questions regarding your financial situation. This meeting is typically not more than 10 minutes and it is rare for unsecured creditors to show up. We will appear at the meeting of creditors with you, and will prepare you thoroughly to avoid any surprises.

After the initial meeting of creditors, generally your case is done. We now wait for the “Final Discharge,” (closing of your case), which occurs, once again, 3-4 months after the initial meeting of creditors.

STOPPING CREDITORS ACTION BY FILING BANKRUPTCY

One of the most common reasons people file for bankruptcy protection is to stop your creditors from collection action against you.

Simply, when our office electronically files your bankruptcy, whatever creditor activity that has been taken against you must cease. No more liens against your home, no more frozen bank accounts, no more garnishees, and even no more telephone calls at work or home.

Effect on a Frozen Bank Account, the filing of the bankruptcy petition with the court will terminate the lien against your account. Any monies already taken will not be returned. You will however be able to resume deposits into that account without fear of it being seized by a creditor.

Effect on garnishees, the filing of the bankruptcy petition with the court will terminate the wage garnishment against you. Any monies already taken will not be returned.

EXPLANATION OF BANKRUPTCY DISCHARGE
IN A CHAPTER 7 CASE

This court order grants a discharge to the person named as the debtor. It is not a dismissal of the case and it does not determine how much money, if any, the trustee will pay to creditors.

Collection of Discharged Debts Prohibited
The discharge prohibits any attempt to collect from the debtor, a debt that has been discharged. For example, a creditor is not permitted to contact a debtor by mail, phone, or otherwise, to file or continue a lawsuit, to attach wages or other property, or to take any other action to collect a discharged debt from the debtor. [In a case involving community property: There are also special rules that protect certain community property owned by the debtor’s spouse, even if that spouse did not file a bankruptcy case.] A creditor who violates this order can be required to pay damages and attorney’s fees to the debtor.

However, a creditor may have the right to enforce a valid lien, such as a mortgage or security interest, against the debtor’s property after the bankruptcy, if that lien was not avoided or eliminated in the bankruptcy case. Also, a debtor may voluntarily pay any debt that has been discharged.

Debts That are Discharged
The chapter 7 discharge order eliminates a debtor’s legal obligation to pay a debt that is discharged. Most, but not all, types of debts are discharged if the debt existed on the date the bankruptcy case was filed. (If this case was begun under a different chapter of the Bankruptcy Code and converted to chapter 7, the discharge applies to debts owed when the bankruptcy case was converted.)

Debts that are Not Discharged
Some of the common types of debts which are not discharged in a chapter 7 bankruptcy case are:

1. Debts for most taxes;
2. Debts that are in the nature of alimony, maintenance, or support;
3. Debts for most student loans;
4. Debts for most fines, penalties, forfeitures, or criminal restitution obligations;
5. Debts for personal injuries or death caused by the debtor’s operation of a motor vehicle while intoxicated;
6. Some debts which were not properly listed by the debtor;
7. Debts that the bankruptcy court specifically has decided or will decide in this bankruptcy case are not discharged;
8. Debts for which the debtor has given up the discharge protections by signing a reaffirmation agreement in compliance with the Bankruptcy Code requirements for reaffirmation of debts.

This information is only a general summary of the bankruptcy discharge. There are exceptions to these general rules.

Because the law is complicated, you may want to consult an
attorney to determine the exact effect of the discharge in this case.