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Bankruptcy can be a new beginning, not an ending. But with all legal matters you need a good team on your side to help you navigate the legal system. We are here to help you do just that. Call us today to find out more details on what can and cannot be done in your particular situation, as you know each is very different and we treat each case as such.

Chapter 7 Bankruptcy - Debt Discharge

Chapter 7 bankruptcy is technically called a liquidation or "straight" bankruptcy, but what the main reason to file for Chapter 7 bankruptcy is to discharge one's unsecured debt (with certain exceptions) while keeping one's "exempt" property. The best known exemptions are the following:

Homestead - Exemption is $75,000 for family member living with one or more non-owner family members; $150,000 for a person who is 65 or older, disabled, or who is 55 or older with an annual gross income of $15,000 or less if single or $20,000 or less if married. $50,000 for all other persons.

Wages - 75 percent of all "paid earnings" are exempt.

Automobile - Up to $2,300 of the equity in all automobiles.

Other Property - Household furnishings, appliances, provisions, wearing apparel, and other personal effects are 100% exempt if they are ordinary and necessary. $2,300 of the aggregate equity in one or more automobiles is exempt. $6,075 each for jewelry and personal property used in the debtor's trade or business is exempt.

Although Chapter 7 bankruptcy is technically called a "liquidation" bankruptcy, most cases do not involve any liquidation of a person's property as one would not file for Chapter 7 if one has significant non-exempt property that one does not want to lose. If one has significant non-exempt property that a Chapter 7 bankruptcy trustee would be able to liquidate for the benefit of your creditors, Chapter 13 is usually more appropriate. A joint Chapter 7 case may be filed together by a husband and wife.  

Basic Steps for Chapter 7 Case

____ 1. First consultation with bankruptcy attorney to discuss financial and legal situation

____ 2. Provide documents to to bankruptcy attorney for use in preparation of bankruptcy schedules (Do not need to bring to first consultation)

a. credit card and loan statements, other bills
b. drivers license
c. social security card
d. green card
e. bank account statements for past 6 months
f. vehicle registration
g. paycheck stubs or print out for past 7 months h. tax returns for last 3 years

____ 3. Set appointment to review and sign bankruptcy schedules

____ 4. Filing of bankruptcy case by bankruptcy attorney with Clerk of Bankruptcy Court (filing of case stops most creditor actions against you

____ 5. Attend creditors' meeting ("341 meeting") at Federal Building (approx. 4-6 weeks after filing of case), bring original social security card, driver's license, most recent paycheck stub, do not bring portable phone into Federal Building

____ 6. Discharge of Debt (approx. 4 months after filing of case), mailed to you by the Clerk of Court  

Exceptions from Chapter 7 Discharge

Debts not generally dischargeable in chapter 7 bankruptcy include the following:

1. Certain taxes and debts incurred to pay certain taxes

2. Creditors not listed in the bankruptcy case or not otherwise notified about the case (unless-under some case law-the case is a "no-asset case")

3. Debts for fraud or defalcation while acting in a fiduciary capacity, embezzlement, or larceny,

4. Debts to spouse, former spouse, or child for alimony, maintenance, or support and obligations of a similar nature

5. Damages for willful and malicious injury to another or another's property.

6. Certain governmental fines and penalties

7. Certain student loans and obligations to repay educational benefits or overpayments

8. Certain debts arising from driving while intoxicated.

9. Debts for money, property, services, or for credit obtained by false pretenses, false representation, or actual fraud (This includes credit card charges, cash advance, etc. made without the intent to repay). The law presumes charges of more than $l,000.00 for "luxury goods" to one creditor within 60 days of the bankruptcy filing or cash advance totaling more than $l,000.00 within 60 days of the bankruptcy filing to be within this nondischargeability rule

10. Debts for money, property, services, or for credit obtained by use of a written statement that was materially false concerning your financial condition if the creditor reasonably relied on it that was used with the intent to deceive

11. Certain military enlistment bonuses if bankruptcy discharge is less than 5 years after the termination of an enlistment for which an enlistment bonus was paid if the person voluntarily or because of misconduct did not complete the term of enlistment for which the bonus was paid. Other military special pay and accession bonuses are not dischargeable (certain special pay and accession bonuses for pharmacy officers, certain retention bonuses for members of the Armed Forces qualified in critical military skill, and certain debts related to the Information Security Scholarship Program). PL 106-398, 2000 H.R. 4205.  

12. Chapter 13 Bankruptcy - Reorganization and Debt Discharge

13. Chapter 13 is a procedure for individuals with a regular source of income to reorganize their debt while under the protection of the Bankruptcy Court. Unlike Chapter 7, it does not involve the potential liquidation of your property by a bankruptcy trustee. Chapter 13 is often used is stop a mortgage foreclosure and propose a plan to catch mortgage payments up-to-date. During the first phase of a Chapter 13 plan (typically the first 4 years), the mortgage is caught up-to-date. During the second phase of the plan (typically another l year), you pay your mortgage payments directly to the mortgage company and continue with monthly payments to the Chapter 13 Trustee in an amount sufficient to pay a dividend to your unsecured creditors. The payments under a Chapter 13 plan are made to the Chapter l3 Trustee.

14. Chapter 13 is also often by individuals who do not have mortgage problems, but who have credit card, loan, medical bill, etc. problems. In such cases, a Chapter 13 Plan is often proposed with monthly payments over 3 or 5 years sufficient to pay a dividend to unsecured creditors.

This site should not be considered legal advice, but for informational purposes only. Each case should evaluated individually with an attorney.

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