RICHARD H. THOMSON, Attorney at Law would like to help you build a brighter future.

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Chapter 7 Debit Relief

Chapter 7 is commonly referred to as “straight bankruptcy” or “liquidation.”  It allows individuals to obtain a fresh start by discharging most, if not all, of their debts.  Certain debts cannot be discharged in a Chapter 7 case.  These include, but are not limited to, domestic support obligations (i.e. child support, alimony, property settlement, etc.), certain tax obligations, student loans (unless not discharging them would create an “undue hardship”), and debts incurred through wrongful conduct.  Unless the court grants an extension, creditors have 60 days from your 341 Meeting of Creditors (see below) to file objections to the discharge of certain debts or to your discharge in general.

To be eligible to file Chapter 7, you will be required to take a credit counseling course.  This course must be completed before your case can be filed.  After your case is filed, you will be required to take a second course before you will be eligible to receive your discharge.  These courses can be done over the internet and we will assist you in registering for them.  If you do not have access to the internet, you can take the courses in our office on one of our computers.

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Chapter 7 is not for everyone

Chapter 7 is not for everyone. Sometimes, filing for bankruptcy can be one of the worst things someone can do. So, it is extremely important that you be totally candid with your attorney and answer his/her questions as thoroughly and honestly as possible.

It is important that you disclose everything

A trustee can recover money or property paid or transferred to creditors, family members, friends, employers, etc. There are certain dollar amounts and time periods which apply, so it is important that you disclose any and all of these transfers to your attorney so you and your transferee can be protected.

Failure to disclose any assets

There are many on-line search engines available to the trustee to help investigate the possibility of assets. Anymore, it is not difficult to access real estate records, DMV records, tax records, credit histories, purchases, and court records through the internet. Failure to disclose any assets could lead to the denial of your discharge.

While your case is open

While your case is open, you cannot sell, quitclaim, gift, or otherwise transfer or encumber property of the estate. Nor can you settle any lawsuits or claims which arose prior to the filing of your Chapter 7 case. Remember: just because you have received your discharge does not necessarily mean that your case has been closed. If you have any doubts or concerns about assets which might be property of the estate, speak to your attorney before taking any action affecting those assets.

Do not load up on debit prior

If you are contemplating filing for Chapter 7 bankruptcy, do not load up on your credit cards or incur other, non-essential debt shortly before filing. The court may presume this to be fraudulent activity (i.e. you incurred the debt knowing that you did not intend to pay it back) and it may be excepted from your discharge. Again, it is always best to get your attorney’s advice beforehand.

Generally, when you file a Chapter 7 petition a temprorary injunction called the automatic stay immediately goes into effect.  With some exceptions, the automatic stay prevents creditors from taking action to collect from you or your property.  It applies to phone calls, collection letters, lawsuits, garnishments, repossessions, foreclosures, etc.  The purpose of the automatic stay is to give you some breathing room, preserve your assets, and promote your fresh start when you exit bankruptcy.

Once your Chapter 7 case is filed, a trustee is appointed to administer your case and your assets vest in the trustee.  Essentailly, the trustee controls those of your assets which are not statutorily excluded or exempted from the bankruptcy estate. The trustee’s job is to locate any unexempt estate assets and liquidate them to pay your creditors.  The vast majority of consumer cases in our district are “no-asset” cases.  In other words, all of the debtor’s property is exempt from liquidation and/or there is no equity available for the benefit of creditors.

The Chapter 7 trustee (not the bankruptcy judge) presides over your 341 Meeting of Creditors.  This hearing takes place about 30 days after your case is filed.  You are required to attend this hearing.  One of our attorneys will be there with you.  The trustee will swear you in, have you identify yourself for the record, and then ask you a brief series of questions to determine if there are any assets available for the trustee to liquidate. These questions will be similar to the ones your attorney asks you during the intake process. This hearing generally takes about 5 – 8  minutes from beginning to end.  You will need to bring a government-issued picture id, separate government-issued proof of your social security number, and a copy of your last filed, federal tax return.  You should arrive at the courthouse 30 minutes early – (a) sometimes there can be a lengthy wait in the security line; and, (b) it will give you an opportunity to meet with our attorney and watch some of the other hearings beforehand.  Please remember to leave your cell phone(s) at home or in your car – they will not be allowed in the courthouse.

Shortly after the 341 Meeting of Creditors is concluded, the trustee will file a report with the court which will say either (a) there are no assets available for the benefit of your creditors or, (b) the trustee is investigating the possibility that assets are available. In a no-asset case, once the deadline for objecting to disharge passes without any objections, the court will enter an order granting you a discharge and closing the estate.  At that point, your assets re-vest in you.   If the trustee is investigating assets, once the deadline to object to discharge passes without any objections, the court will enter an order granting the discharge but the estate will remain open.  In that case, property of the estate will remain vested in the trustee until the trustee liquidates it, abandons it, or the case is closed.

Many Chapter 7 debtors have property that is subject to a credtior’s lien (a car loan or a mortgage, for instance).  They often want to retain this property and continue paying the creditor.  This can be accomplished through a reaffirmation agreement.  A reaffirmation agreement is a voluntary agreement between the creditor and the debtor which provides that, although that particular debt is listed in the bankruptcy case, the debtor will continue to make payments on it and the debt will not be discharged.  For that particular debt, it’s almost as though the bankruptyc case was never filed.  The agreement must be made prior to the entry of the discharge and it must be filed with the Bankruptcy Court.  A debtor may rescind the agreement within 60 days after it is filed with the Court or the date the discharge is entered – whichever is later.  If you have property that is subject to a creditor’s lien which you want to keep but you don’t believe the creditor will reaffirm with you (or the terms are too expensive), then you might want to consider filing a Chapter 13 case.

* Individuals must qualify for the $75 partial filing fee. The balance of the court costs must be paid directly to the clerk in installments.
The $75 filing fee does not include the costs of obtaining clients’ credit reports or the fees for the required credit counseling courses.