How Chapter 7 Works

Chapter 7 bankruptcy!

Chapter 7 bankruptcy begins with you filing a petition in the federal court serving the area where your principal place of business or principal assets reside. Locate the court nearest you Federal Bankruptcy Courts.

  1. Getting Started
  2. Filing fees
  3. The “Automatic Stay”
  4. Exempt Property
  5. The Meeting of Creditors
  6. Converting to another chapter

Getting started  

You’ll need to file schedules of assets and liabilities, a schedule of current income and expenditures, a statement of financial affairs, and a schedule of executory contracts and unexpired leases. Chapter 7 forms and schedules

You’ll also need:

  1. List of all creditors and the amount and nature of their claims;
  2. The source, amount, and frequency of your income;
  3. List of all of your property; and
  4. Detailed list of your monthly living expenses, (i.e., food, clothing, shelter, utilities, taxes, transportation, medicine, and so forth).

Up Filing fees  

Currently, the federal bankruptcy courts charge a Case Filing Fee of $200. There may be additional miscellaneous fees and a trustee surcharge. The total amount is subject to change so be sure to check with the clerk of the court .

NOTES: Fees are paid to the court clerk in up to 4 installment payments not to exceed 120 days. This may be extended but not more than 180 days. Husband and wife may file joint or individual petitions! Joint petitions require only one filing fee. Failure to pay these fees may result in dismissal of your case.

Up The “Automatic Stay”  

Your goal is to get an “order of relief” that triggers the “automatic stay”which stops creditors and collectors from pursuing you or your property outside of the bankruptcy proceeding. Creditors receive notice of your filing from the court clerk and as long as the “automatic stay” is in effect, creditors generally cannot initiate or continue any lawsuits, wage garnishments, or even telephone calls demanding payments.

WARNING! Under the new Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, foreclosure is not longer stayed by filing bankruptcy. Also, this items exempted from the automatic stay has been expanded to include:

  • Income withholding under court order
  • Suspension of driver’s license
  • reporting of overdue child support to credit reporting agencies
  • interception of tax refunds
  • enforcement of medical obligations

Up Exempt Property  

Under federal or state bankruptcy laws you can protect some exempt property from the claims of creditors. You’ll need to file a schedule of “exempt property”.

NOTE: Many state bankruptcy laws allow you the option of choosing between federal or state exemptions.

UpThe Meeting of Creditors (341)  

The “ 341 meeting of creditors” is held 20 to 40 days after filing bankruptcy but cannot be held later than 60 days after the order for relief. You must attend! If a joint petition was filed then husband and wife must attend.

During the meeting of creditors, the trustee will ask you if you are aware of the potential consequences of seeking a bankruptcy discharge, including the effect on your credit history, the ability to file a petition under a different chapter, the effect of receiving a discharge, and the effect of reaffirming a debt. Be prepared to answer these questions in order to make the process go smoothly.

Creditors may or may not attend, and if they do, they have the right to ask you questions regarding your financial affairs and property. It’s important to cooperate by providing financial records or documents that the trustee requests and by answering their questions in good faith.

Bankruptcy judges are prohibited from attending the meeting of creditors.

Up Converting to another bankruptcy chapter  

The bankruptcy code allows you to convert a chapter 7 case to either a chapter 11reorganization case or a chapter 13 repayment case, as long as you meet the eligibility standards under the chapter to which you are seeking to convert, and and the case has not previously been converted.

WARNING! Under the new law, if you do not meet the financial requirements of the “Means Test” then you will have to file chapter 13; repayment bankruptcy.

The Role of the Trustee

The Chapter 7 Discharge

Chapter 7 Forms

Alternatives to Bankruptcy