Robert B. Harris, Attorney at Law
Chapter 7 Bankruptcy
A Chapter 7 Bankruptcy, also known as a liquidation bankruptcy, is a chapter of bankruptcy available to consumer debtors. It is commonly referred to as a FRESH START bankruptcy. There are two main eligibility requirements a debtor must meet before they can receive a discharge under Chapter 7. The first one is that the debtor must not have received a Chapter 7 discharge in a prior bankruptcy case filed within eight (8) years of the current case. The second requirement is that the debtor's household income must be below the annual median income for their household size of the state they live in. The debtor's annual median income is determined by averaging the income from the six months' preceding the bankruptcy filing and multiplying that monthly average by 12.
Even if a debtor meets the two eligibility requirements described above, they should still discuss filing a Chapter 7 bankruptcy with an attorney. There are numerous other factors to be considered when filing a Chapter 7 bankruptcy. Other considerations include how the debtor's assets compare to the exemption statutes available to the debtor, the nature of the debts the debtor is attempting to discharge, and whether there are alternative forms of debt relief available or better suited for the debtor's situation.
The Chapter 7 Process:
The entire Chapter 7 process takes about 100 days from filing the petition to discharge. Debtors should expect to provide their attorney with documentation concerning all of their income, assets, expenses, and debts. That information is put into the bankruptcy petition, schedules, and related documents. Debtors must also complete a pre-filing credit counseling course. The bankruptcy petition, schedules, related documents, and the certificate of completion of the credit counseling course are filed with the Bankruptcy Court. The Bankruptcy Court charges a debtor a $306.00 filing fee to open a Chapter 7 case.
Upon filing the bankruptcy petition, the AUTOMATIC STAY goes into effect. The automatic stay prohibits the debtor's creditors from collecting pre-petition debts directly from the debtor. There are few exceptions to the automatic stay, the most common being a debtor's continued obligation to pay child support or maintenance. Now that the case has been filed, the debtor must take a second credit counseling class and the certificate of completion must be filed with the Bankruptcy Court. The Bankruptcy Court appoints a Chapter 7 trustee to administer the debtor's case. A meeting with the bankruptcy trustee is scheduled 4 - 6 weeks after filing. The debtor must appear at this meeting with a photo ID and a social security card. The debtor's creditors can also appear at this hearing to question the debtor, though few creditors ever show up. The trustee questions the debtor under penalty of perjury concerning the information contained in the bankruptcy petition, schedules, and related documents.
If the debtor answers the trustee's questions satisfactorily, the meeting is concluded. The conclusion of the meeting starts certain timelines for creditors to object to the debtor's exemptions or the discharge of that creditor's debt. If no objections are filed, the debtor can expect their discharge about 60 days after the meeting with the trustee. The debtor is, however, under a continuing obligation to inform the trustee if they inherit, or become entitled to inherit, any money or property from an estate or life insurance policy within 6 months of the date of filing bankruptcy.