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The following article was published in our article directory on February 23, 2012.
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How Chapter 7 Bankruptcy Takes place

Article Category: Advice

Author Name: John Johnson

A chapter 7 case commences with the consumer filing a petition with the bankruptcy court serving the area where the debtor resides or where the business debtor is organized or has its principal place of business or primary assets. Along with the petition, the debtor must additionally register with the court: reports of assets and liabilities; a schedule of current salary and outlays; a statement of financial affairs; and a schedule of executory contracts and unexpired leases.

Debtors have to also deliver the nominated case trustee with a copy of the tax return or records for the most recent tax year as well as tax returns filed during the case (including tax returns for earlier years that had not been filed when the case got going).

Individual consumers with mainly consumer debts have added document filing obligations. They must file: a certificate of credit counseling and a copy of any debt repayment plan developed through credit counseling; evidence of payment from employers, if any, received 60 days before filing; a statement of monthly net income and any anticipated increase in salary or expenses after filing; and a report of any interest the debtor has in federal or state qualified education or tuition accounts. A husband and wife may file a joint petition or individual petitions.

Even if filing jointly, a husband and wife are subject to all of the document filing prerequisites of individual debtors.

The courts must absolutely charge a $ 245 case filing fee, a $ 46 assorted administrative fee, and a $ 15 trustee surcharge. Typically, the fees must be remitted to the clerk of the court upon filing. With the court's permission, however, individual debtors may make payment in installments.

The number of scheduled payments is limited to four, and the debtor has to make the final installment no later than 120 days right after filing the petition.

For cause revealed, the court may draw out the time of any installment, provided that the last payment is remitted not later than 180 days after filing the petition. The debtor may also pay the $ 46 admin charge and the $ 15 trustee surcharge in installments. If a joint petition is submitted, only one filing charge, one administrative fee, and one trustee additional charge are charged. Debtors should be aware that failing to pay these expenses may result in termination of the case.

If the debtor's salary is less than 150 % of the poverty level (as defined in the Bankruptcy Code), and the debtor is incapable to pay the chapter 7 fees even in installments, the court may waive the requirement that the costs be paid.

In order to finalize the Official Bankruptcy Forms that make up the petition, statement of financial affairs, and schedules, the debtor must provide the following information:

* A list of all financial institutions and the sum and attributes of their claims;
* The source, sum, and frequency of the debtor's salary;
* A list of all of the debtor's property; and
* A detailed list of the debtor's monthly living expenses, i.e., food, clothes, shelter, utilities, levies, transportation, prescriptions, etc.

Married individuals must gather this info for their partner regardless of whether they are submitting a joint petition, separate individual petitions, or even if only one spouse is filing bankruptcy. In a situation where only one spouse files, the income and expenses of the non-filing spouse are required so that the court, the trustee and creditors can look at the household's fiscal situation.

Among the schedules that an individual debtor will file is a schedule of "exempt" property. The Bankruptcy Code permits an individual debtor to defend some property against the claims of creditors since it is exempt under federal bankruptcy statute or under the laws of the debtor's home state.

Many states have indeed taken advantage of a provision in the Bankruptcy Code which lets each state to choose its own exemption law in place of the federal exemptions. In more jurisdictions, the individual debtor has the choice of choosing amongst a federal package of exemptions or the exemptions available under state law. Thus, whether certain property is exempt and may be held by the debtor is typically a question of state law. The debtor needs to consult a lawyer or attorney to find out the exemptions available in the state specifically where the debtor lives.

Filing a petition under chapter 7 "automatically stays" (stops) most collection processes against the debtor or the debtor's property.

However filing the petition does not stay certain types of actions and the stay may be effective only for a short time in some situations. The stay develops by operation of law and requires no judicial action. As long as the stay is in effect, creditors normally may not initiate or proceed legal actions, wage garnishments, or even telephone calls necessitating payments. The bankruptcy clerk gives notice of the bankruptcy case to all lenders whose names and addresses are presented by the debtor.

Between 21 and 40 days just after the petition is filed, the case trustee will have a meeting of creditors. If the U.S. trustee or bankruptcy administrator organizes the meeting at a place that does not have regular U.S. trustee or bankruptcy administrator staffing, the gathering may be held no more than 60 days after the order for relief.

In the course of this meeting, the trustee puts the debtor under oath, and both the trustee and creditors may ask questions. The debtor must absolutely attend the meeting and answer questions regarding the debtor's financial affairs and property.

If a husband and wife have filed a joint petition, they both must attend the creditors' meeting and respond to questions. Within 10 days of the creditors' meeting, the U.S. trustee will recount to the court whether the case should be presumed to be an abuse under the means test.

It is important for the borrower to cooperate with the trustee and to provide any money registers or papers that the trustee demands. The Bankruptcy Code demands the trustee to ask the debtor questions at the meeting of creditors to make certain that the debtor is aware of the potential consequences of seeking a discharge in bankruptcy such as the effect on credit record, the potential to file a petition under a different chapter, the ramification of receiving a discharge, and the outcome of reaffirming a debt. Some trustees provide written instruction on these issues at or before the meeting to ensure that the debtor is aware of this information. In order to maintain their independent judgment, bankruptcy judges are excluded from attending the meeting of creditors.

In order to render the debtor total relief, the Bankruptcy Code allows the debtor to convert a chapter 7 case to a case under chapter 11, 12, or 13 as long as the debtor is suitable to be a debtor under the new chapter. Having said that, a condition of the debtor's voluntary conversion is that the case has not previously been transformed to chapter 7 from another chapter.

Thus, the consumer will certainly not be allowed to convert the case repeatedly from one chapter to another.

Keywords: money,credit,debt,bankruptcy,law,legal

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