Chapter 7 Bankruptcy

Chapter 7 Bankruptcy is designed for debtors who do not have the ability to repay their debts through either a Chapter 13 or Chapter 11 repayment plan.

In Chapter 7 cases, all of your property becomes property of a "Bankruptcy Estate" upon the filing of your case and a Trustee is assigned to liquidate your unexempt property and distribute the proceeds to your creditors. However, State and Federal laws allow you to protect or "exempt" a certain amount of your property from the bankruptcy estate and in the majority of cases you can exempt all of your property.

Once your Chapter 7 Bankruptcy case is filed, you will be required to attend what's known as the "341(a) Meeting of Creditors" which occurs approximately 1 month after your case is filed. This hearing is primary designed for the Chapter 7 Trustee to verify your identity and to get your oral testimony under penalty of perjury that all the information contained in your bankruptcy paperwork is accurate and truthful. The hearing also gives the Trustee an opportunity to ask you additional questions regarding the information contained in your bankruptcy paperwork.

Altough your creditors may attend the 341(a) Meeting of Creditors to ask questions regarding the nature and location of assets, it is extremely rare that your creditors will appear. If your creditors were to object to your bankruptcy, the hearing would not be the appropriate forum to make such an objection and therefore, creditors very rarely make an appearance at this hearing.

Once your Chapter 7 Case is filed with the Court, your Creditors and other parties of Interest have approximately 90 days to file an objection to your discharge. If no objection is timely filed, you will receive the official discharge of your debts shortly after that 90 period has expired.

Though objections to discharge are rare, if one is filed, you always have an opportuntiy to oppose and ultimately the decision will go before a judge.

A Chapter 7 Discharge releases you from legal responsibility for most unsecured debts as well as discharges your personal liability on most secured debts. However, secured debts remain secured and if not paid, you will still risk repossession/foreclosure.

A Chapter 7 Discharge does not release your liability for recent income taxes, most other types of taxes, Domestic Support Obligations, Student Loans, and a few other non-dischargeable debts.

A Chapter 7 Bankruptcy may appear on the public records section of your credit report for up to 10 years. The accounts being affected by your bankruptcy may stay on your credit report up to 7 years. Once your Bankruptcy is discharged and notice is sent to the Creditors, the accounts discharged in your bankruptcy should read similar to "$0 balance owed, discharged in Bankruptcy" on your credit report. At this point, you can immediately start re-establishing your credit and within a year or two can be back up to a decent level of credit.

Call us for a free consultation to discuss your specific situation and determine whether or not a Chapter 7 bankruptcy is right for you.

Chapter 13 Bankruptcy

Chapter 13 Bankruptcy is designed for debtors with regular income who have the ability, need, and/or the desire to repay a portion or all of their debt back through a debt repayment plan. Chapter 13 Bankruptcy is also designed to allow debtors to catch up on past due secured debts (mortgages/car loans) without the lender being able to repossess.

Chapter 13 Bankruptcy is basically a debt consolidation pursuant to Federal Law that binds your creditors to a repayment plan based on your budget. Chapter 13 is almost always more advantageous to the debtor than a private debt consolidation plan.

In Chapter 13 cases, you generally can keep all of your property but must repay your unsecured creditors at least the value of any of your unexempt assets that would be sold had you filed a Chapter 7 Bankruptcy.

In preparing a Chapter 13 repayment plan, your income and expenses are carefully analyzed to determine how much “disposable income” you are able to pay towards your debts each month. After in-depth calculations based on income, expenses, assets, and various other provisions of Chapter 13, a repayment plan is proposed and filed with the Court. A Chapter 13 Plan is generally proposed to run between 3 to 5 years depending on various factors.

Once your Chapter 13 case is filed with the Court, you must attend the “341(a) Meeting of Creditors” with the Chapter 13 Trustee. This hearing occurs approximately 1 month after your case is filed and is generally when you must make your first Chapter 13 plan payment.

The Chapter 13 Trustee is responsible for making sure your Chapter 13 plan complies with the law and that it proposes that you pay all of your disposable income towards your debts for the duration of your plan. The Chapter 13 Trustee is also responsible for collecting your Chapter 13 plan payment each month and distributing your funds to your creditors pursuant to your plan.

If the Chapter 13 Trustee or one of your creditors objects to your proposed plan, a confirmation hearing will then be scheduled before the bankruptcy Judge. Between the 341(a) Hearing and the confirmation hearing, your attorney and the objecting party will try to reach a resolution. If no resolution is reached, the Bankruptcy Judge will decide at the confirmation hearing whether your plan should be “confirmed” as is, that your plan needs to be amended, or in rare cases, that your case should be dismissed for not proposing a feasible and/or good faith chapter 13 plan. Debtors do not usually need to attend the confirmation hearing.

Once your Chapter 13 Plan is confirmed, it is thereafter binding on all of your creditors. Once you complete your Chapter 13, you will then receive a discharge of your unpaid debts, subject to some limitations. During your Chapter 13 you may also modify your Chapter 13 plan if there is a change in circumstances. You may also convert your Chapter 13 case to a case under Chapter 7 if the facts allow such a conversion under the law.

Chapter 13 is advantageous to debtors who have fallen behind on secured debts (houses/cars) or who have debts that cannot be discharged in a Chapter 7 (Past due taxes/Domestic Support obligations) as you may, in certain circumstances, consolidate secured debt arrearages and/or priority debts like income taxes or domestic support obligations and pay these over a 3 to 5 year period of time while paying the rest of your debts little or nothing. At the end of the 3 to 5 year period of time, you will have either caught up on your mortgage, paid off your car, and/or paid off your past due income taxes or domestic support obligations while not having paid much or anything towards your credit cards, loans, etc. and will receive the discharge of those debts at the end of your Chapter 13. During the Chapter 13, your creditors may not contact you, sue you, or take any other action to collect on your debt(s).

Call us for a free consultation to discuss your specific situation and determine whether or not a Chapter 13 bankruptcy is right for you.