Chapter 7 Bankruptcy and Steps That Occur in Filing a Chapter 7 Bankruptcy

In order to be eligible to file a Chapter 7 bankruptcy, you must be able to meet these guidelines:

• You must reside or have a domicile, a place of business, or property in the United States.
• You must not have received a bankruptcy discharge within the last six (6) years or have had a bankruptcy case dismissed within the last 180 days.
• Have a steady source of income so that you can make regular payments to the Trustee.
• The total amount of your debts cannot exceed $750,000.00 and unsecured debts cannot be more than $250,000.00.

People who file a Chapter 7 bankruptcy do so in order to discharge their debts and get a “fresh start” in life. There are no income requirements to file a Chapter 7 and people who file this type of bankruptcy are those who can no longer afford to repay all their debts due to illness, unemployment, marital problems, unexpected medical expenses, over-extended credit or other large expenses. However, not all debts can be discharged. For example, alimony, student loans, child support and taxes that are less than 3 years old are non-dischargable and must be repaid in full.

Most consumers file a Chapter 7 bankruptcy and then reaffirm on the debts they want to continue paying. For instance, you can file a Chapter 7 and reaffirm on your house. This could possibly erase your other debts and you would continue making your house payments like you normally do now, outside the bankruptcy. (Note: There is pending legislation currently being debated in Washington D.C. to change this law, making it harder for people to file a Chapter 7 and forcing them to file a Chapter 13, but the law has not been enacted as of the date this ebook is written.)

When your bankruptcy petition is prepared and signed by you, it is filed with the Bankruptcy Court. You are assigned a case number and a Trustee or “interim” Trustee. An interim Trustee is the person who is responsible for overseeing your bankruptcy until the Meeting of Creditors, at which time you will be appointed a new Trustee or the interim Trustee will be assigned to your case.

If you plan to reaffirm on a debt (which means you want to continue paying the bill on your own after the bankruptcy is over), your attorney or paralegal needs to submit a Reaffirmation Agreement to the creditor, obtain their signature and file this with the court. However, you can still pay the bill on your own without filing a Reaffirmation Agreement; but it is best to file one if the creditor you owe can repossess something you want to keep (i.e., car, house, TV, computer, tools, etc.).

The Trustee will send a notice to all the creditors (people/companies you owe money to.) This notice is normally sent 5 days after you file your petition.

The court will normally send you a notice informing you that you are eligible to file bankruptcy. You don’t have to do anything with this notice but keep it in your personal file.

The Trustee will then send all your creditors, including you, a notice informing you of the hearing date when you should appear in court. This hearing is often referred to as the “Meeting of Creditors.”

At your Meeting of Creditors NO judge will be present. The Trustee will ask you some of the same questions you answered when you first filled out the paperwork for the attorney or paralegal; who originally prepared your bankruptcy petition.

In actual practice, creditors rarely appear at these hearings; however, a representative from one of the companies you owe, or a person you owe, may show up at this meeting. They normally only appear to ask where the secure item is and if it is insured.

If your bankruptcy case is a “no asset” Chapter 7 bankruptcy, the meeting will normally only last 5-10 minutes.

If your bankruptcy case is a “no asset” Chapter 7 bankruptcy; you normally will not have to appear in court again. Essentially, you will receive a discharge through the mail and all your allowed debts are forgiven.