Posts Tagged ‘chapter 7 bankruptcy’

What Steps are Involved in Filing for Chapter 7 Bankruptcy?

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Bankruptcy is not a punishment. It is a protection. But contrary to popular belief, this protection is not for creditors. It is for debtors.

This is because the courts — which essentially represent the will of society — recognize that it is not in society’s best interest for condemn people in debt to a lifetime of financial agony; even if the wounds are self-inflicted vs. caused by unforeseen external events (e.g. excessive medical bills, etc.).

As such, bankruptcy gives debtors the time, legal protection, and financial relief they need to get out — and ideally stay out — of debt, so they can (again, ideally) make a positive contribution to society down the road.

Of course, this doesn’t mean that creditors are left high and dry. They will typically get partial payment based on where they are in the pecking order. And some debts such as alimony, child support, student loans, and court-ordered restitution per a previous criminal conviction cannot be discharged as part of a bankruptcy filing (with this in mind, the court may consider a structured repayment plan if debtors can prove that they cannot meet their full obligations on these debts, and programs exist to provide some relief for student loans).

Steps in Filing for Bankruptcy

Now that you are aware that filing for bankruptcy is essentially a legal protection for debtors and not a collection method for creditors (in fact, as we’ve written about creditors typically don’t want debtors to file for bankruptcy!), we can look at the other unknown aspect that fills many people with anxiety and distress: what the filing process looks like.

Basically, here are the steps that you’ll take on your journey of filing for chapter 7 bankruptcy:

  1. Within six months of filing for bankruptcy, you must complete a mandatory credit counseling course. The course is delivered through in-person training, as well as via the web.
  2. You must submit a complete application to the court that includes financial statements, income tax assessments, and proof that you pass your state’s respective chapter 7 means test. If you wisely hire a bankruptcy attorney to represent and guide you, then he or she will handle this on your behalf and ensure that your application is complete. Note that if your application is incomplete, then it will be delayed or may be denied, and you will not be granted an automatic stay from your creditors. They will continue to contact you, charge interest on debts, and proceed with collection activity such as wage garnishment and civil lawsuits.
  3. If your application is complete and accepted, the court will assign a trustee to govern the remainder of the bankruptcy process. Keep in mind that the trustee does not work for you or for creditors. He or she is an officer of the court.

  4. Your creditors will be invited to a meeting that you must attend (if you have an attorney, then he or she will accompany you). During this meeting, the trustee and creditors will have the opportunity to ask you questions about your finances and future earning potential.

  5. After the meeting of creditors (also called a “341 Meeting’), your eligibility to file for chapter 7 will either be confirmed or denied, largely on the basis of whether you passed the chapter 7 means test. If you are not eligible, then you will typically be able to file for chapter 13 bankruptcy in which you propose a structure repayment plan that is typically executed for 3-5 years.

  6. The trustee will then take an inventory of your non-exempt assets (i.e. items that can be sold or liquidated to pay off your debts). You might also be able to negotiate with the trustee to retain certain non-exempt assets. Essentially, if the trustee can get as much or more from you vs. another party, there is a good chance you will be able to keep the asset(s).

  7. Next, the trustee goes through your secured assets and determines what assets will be returned to creditors. You may be able to retain some of these assets by paying for them, or reaffirming debt. However, keep in mind that if you wish to reaffirm any debts, then you must attend a reaffirmation hearing in front of a judge. If you have an attorney, then he or she can represent you at the hearing and you do not have to attend.

  8. You must complete a financial management course. Similar to the credit counseling course that must be taken within the six months immediately prior to filing for bankruptcy, the financial management course is available in-person and online. Once you have completed the course, you must submit a form to the court verifying your achievement.

  9. Within 3-6 months after filing, you will receive a discharge notice in the mail (your attorney will also receive a copy). At this point, the automatic stay is lifted — which is fine, because even if you have creditors at this point, they will not be threatening you with collection activity.

  10. Typically within a few days (or sometimes a few weeks) after getting your discharge notice in the mail, you will receive a letter informing you that your case has been closed. You will no longer be liable to most (or ideally all) of your creditors, and can start your new life ahead with a clean financial slate.

Learn More

To learn more about the process of filing for chapter 7 bankruptcy, contact the Law Office of Charles Huber today. We have over 30 years of experience filing consumer bankruptcy cases. Our experience is your advantage!

The Basic Facts of Filing for Chapter 7 Bankruptcy While Separated

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Whether temporary or leading to divorce, separation can be an emotionally traumatic experience. Indeed, even in so-called “good breakups” (which some people consider a contradiction in terms) can cause wounds that can only be healed with time, support, and possibly the assistance of a qualified mental health professional like a psychologist, psychiatrist, therapist or counselor.

However, it is less well-known that separation can — and often does — impose a major financial burden as well. Unfortunately, creditors frankly do not care and have zero compassion when it comes to this very common scenario. They demand payment, and will not pause their aggressive collection efforts — including filing lawsuits — because a debtor is going through a very difficult time in their relationship or family.

If you are facing this difficult situation, then filing for chapter 7 bankruptcy might be in your best financial interest. Here are some basic facts that will help you decide if contacting a bankruptcy attorney for a closer look at your options is a worthwhile next step:

  • Contrary to what many people believe, individuals can indeed file for bankruptcy while legally separated. They do not need to file jointly (although in some cases it may be beneficial to do so).
  • Usually, any new debts that you incur after legally separating will be your responsibility (and the same applies to your spouse).
  • If you and your spouse have joint credit cards or other joint debts, then these will continue accumulating and creditors may seek to enforce the debt against the non-filing spouse. In other words: if your spouse files for bankruptcy and you do not, then creditors may come after you — and not your spouse — to pay up, even though the debt was initially incurred by both of you.
  • In the same light as the point immediately above: depending on the homestead exemption laws in your state, if your spouse files for bankruptcy and you do not, then creditors may seek to foreclose on your home in order to resolve outstanding debts that were incurred by you and your spouse.
  • If you file for bankruptcy and ultimately discharge your debts in federal court, the family court in your state may use your new (and larger) disposable income amount to reduce your alimony award if you are due to receive a monthly amount, or increase your obligation if you are due to pay a monthly amount.
  • Should You File While Separated or Wait for Divorce?

    Whether you should file for chapter 7 bankruptcy while separated, or if you should wait until you are officially divorced, is an extremely important issue to resolve — one that will have a lasting impact on your financial future for decades to come.

    The above facts are NOT intended to point in you in one direction or the other. Rather, they are meant to give you a basic understanding of the landscape. The only source that can provide you with counsel for your specific situation is an experienced bankruptcy attorney. Be advised that your family lawyer cannot (and should not) provide you with this type of financial advice, since it is not their area of specialization. Fortunately, this warning is usually a non-issue, since qualified and credible family lawyers will always refer you to a bankruptcy attorney if they believe that it is in your best interest to consult with one.

    Learn More

    To learn more contact the Law Office of Charles H. Huber. We have over 30 years of experience filing bankruptcy cases, and have helped numerous individuals going through the legal separation.

What Happens After You Declare Chapter 7 Bankruptcy?

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One of the most daunting, stressful, and for some people, terrifying aspects of filing for chapter 7 bankruptcy is not based on what they know about the process. On the contrary, it is rooted in what they do not know — because for most people it is a new experience, and unfortunately, the world (both the online and offline versions) is full of chapter 7 bankruptcy myths.

If you are considering filing for chapter 7 bankruptcy, then your bankruptcy attorney will provide you with a clear understanding of what the road ahead will look like. Generally speaking, here is what you can expect:

  • Your bankruptcy attorney will file your case electronically, and remit all required filing fees on your behalf. You do not have to go court.

  • The court will send a letter to all the creditors listed in your filing, informing them that they must cease all collection-related activity and communication. You and your bankruptcy attorney will also receive a copy of this letter. If creditors have questions or objections, they will not be allowed to contact you directly. They must only contact the court-appointed trustee, who may in turn communicate with your bankruptcy attorney.

  • You will continue paying debts on assets that you wish to keep, such as your car loan and mortgage, along with ongoing living expenses such as utilities. It is very important that you do not stop paying these specific debts, or assume that your creditors will grant you a temporary moratorium or an extended grace period due to the filing.

  • The above-noted letter will also include the date and time for a meeting of creditors. This date is usually set for a month or so after the filing. About a week before the meeting, your bankruptcy attorney will send the trustee a copy of your most recently-filed tax return.

  • The meeting of creditors — which is also called a debtor’s exam or 341 hearing — is an opportunity for any authorized creditor, along with the trustee, to ask you questions under oath. Although the meeting is likely to take place in a courthouse, there is no judge present, and it typically does not last longer than 15 minutes. It is also typically not a confrontational or adversarial exchange, but instead an opportunity to seek administrative clarity. With this being said, be assured that your bankruptcy attorney will attend the meeting with you to ensure that your rights are fully protected, and that you are treated with respect at all times.

  • If you are unable to attend the scheduled meeting of creditors, then you may request (through your bankruptcy attorney) a reset date. It is extremely important that you do not miss both the original and reset date. If your absence is not due to dire unforeseen circumstances (e.g. serious car accident), then your filing may be dismissed. You must also bring picture ID and proof of a Social Security Number in order to be granted entry to the meeting.

  • After the meeting of creditors, the trustee may request additional documents. This request will be made through your bankruptcy attorney. You do not have to worry about receiving complex or confusing legal documents.

  • Within 45 days of the originally scheduled (not the reset) meeting of creditors, you will need to submit a certificate of completion for a court required financial management course. Your bankruptcy attorney will submit this on your behalf before the deadline.

  • During the bankruptcy proceeding, you may wish to petition the court to make adjustments to your filing. For example, you may want to avoid a lien. Your bankruptcy attorney will handle all such filings, and seek to convince the trustee to accept your request.

  • The timing of a chapter 7 bankruptcy discharge varies from case to case. Typically, it occurs about four months after the date that your bankruptcy attorney filed the petition with the court clerk. Along with you and your bankruptcy attorney, the trustee and all creditors will receive a copy of the discharge order. This order also warns creditors that they must not attempt any further collection of discharged debts, and that doing so could subject them to punishment for contempt.

Learn More

To learn more, contact the Law Office of Charles H. Huber. We will give you the facts you need to make a smart, safe decision on whether filing for bankruptcy chapter 7 is in your best long-term interest. We will also be your knowledgeable and fearless “sword and shield” every step of the way, from initial filing through to successful discharge. We have over 30 years of experience filing consumer bankruptcy cases. Our experience is your advantage!

Chapter 7 Bankruptcy Myths Debunked: Part 2

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One of our most popular blogs is entitled “The Top Chapter 7 Bankruptcy Myths: Debunked!” And as you might expect, we have mixed feelings about this.

On the one hand, we are pleased that more people are getting the FACTS they need to ultimately make a safe, informed decision on whether pursuing chapter 7 bankruptcy is in their best long-term financial interest. Obviously, we are not suggesting that people should make this major decision based solely on our (or any) blog post! However, we are gratified and inspired to see that people are relying on it as part of their research process.

Yet on the other hand, the popularity reveals a problem that we have seen get much worse over the decades due to the ease at which information is shared via the web: many people, including those who are well-meaning and legitimately trying to help, are either partly or wholly misinformed about how chapter 7 bankruptcy works — and how it does not. Sometimes, this ignorance is the result of not staying updated on changes to bankruptcy laws. But other times, this ignorance is, well, just plain ignorant! That is, the so-called facts being shared were wrong in the past, are wrong today, and will be wrong in the future.

Of course, while we are disappointed — and sometimes dismayed — by the sheer volume of bad chapter 7 bankruptcy-related “advice” floating on the web (or in workplaces around water coolers, chatting with neighbors over the backyard fence, and so on), our drive to educate and empower people is far stronger. To that end, here is part 2 of our series on debunking chapter 7 bankruptcy myths:

Myth 5: All states have the same bankruptcy laws and processes.

Fact: Different states have various rules, and assuming what applies in one state is automatically going to apply in another can be — and often is — a catastrophic error. For example, people in Florida who file for bankruptcy cannot lose their house. However, this is not necessarily the case in Pennsylvania.

Furthermore, some people are unaware that there are two sets of bankruptcy laws: federal and state. There are critical differences between them, and they do not focus on the same issues.

Myth 6: You should “strategically plan” your bankruptcy by maxing out your credit cards just prior to filing.

Fact: This is such an astonishingly massive mistake, that it is difficult to know where to begin!

If you follow this horrifically bad advice, then the first thing that will happen is your bankruptcy filing will be dismissed — which means the financial hole that you expected to start getting out of will only get deeper, and you will not be able to file again for at least 180 days. And if you think this is the worst of it, think again.

This is because borrowing money (which is essentially what using a credit card entails) with the intention to avoid paying the lender is not just unethical: it is fraudulent. This means there is a very good chance — assume 100% here — that your case will be handed over to for criminal prosecution.

Now, does this mean that filling up your car with a tank of gas a few days before you file for bankruptcy will be used as evidence of your intention to defraud the credit card company? No. As long as the expense is valid, reasonable, justifiable and passes the “common sense test,” then you will be fine. After all, gas is not a luxury, and neither are groceries. But buying a brand new iPhone or heading out for a weekend excursion to Las Vegas prior to a bankruptcy filing is sure to raise some suspicion, and warrant closer examination.

Myth 7: If you file for bankruptcy, you might as well put up a billboard because everyone will find out.

Fact: This myth is largely driven by companies and consultants that do not want people to file for chapter 7 bankruptcy, because it means they will lose a customer.

The truth is that unless you are famous or have a high-profile job, most people are not going to find out that you have filed for bankruptcy, and frankly, they have no interest in finding out. Bankruptcy is not a criminal matter — it is an administrative one. Close to a million people and businesses in the U.S. file for bankruptcy each year. It is hardly “breaking news.”

As we have described previously, those will definitely know about the filing (because they will be specifically notified) include:

  • Each creditor listed in your filing.
  • The three main credit bureaus: Equifax, TransUnion and Experian.
  • Anyone who is jointly liable for debts per your filing.
  • Plaintiffs in any current or future civil lawsuit.

In addition, the following people might (or might not) know:

  • Defendants in a civil lawsuit — unlike plaintiffs they will not automatically be informed about the bankruptcy filing, but they could find out on their own.
  • Your current employer if wage garnishment activity had started, and would therefore cease per the filing.
  • Any future employers, landlords or lenders if you are asked questions about a past bankruptcy, or if you give them permission to access your credit score (a chapter 7 filing will remain on your score for 7 years.)

Learn More

Filing for bankruptcy is a major decision that you should only make based on FACTS — not MYTHS. To learn more, contact the Law Office of Charles H. Huber today. We have been helping individuals file consumer bankruptcy cases for more than three decades. Our experience is your advantage!

Consumer Chapter 7 Bankruptcy: 5 Requirements to Meet

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Each year, hundreds of thousands of people (i.e. consumers) file for chapter 7 bankruptcy. However, not everyone who files — or who wants to file — will have their application accepted. This is because there are five requirements that must be met:

#1: Filer Eligibility

Only the following categories of people can apply for consumer chapter 7 bankruptcy:

  • individuals
  • married couples who wish to make a joint filing
  • sole proprietors who have personal liability on some business debts
  • 50% owners of a business partnership with someone other than their spouse, and who have personal liability on some business debts

Corporations, partnerships (except the kind noted above), and LLCs cannot file for consumer chapter 7 bankruptcy. Instead, they must file as a business, which is a different process.

#2: Recent Bankruptcy Discharge

Individuals cannot file for consumer chapter 7 bankruptcy if they have been discharged from chapter 7 bankruptcy protection within the last 8 years. Note that the clock starts ticking when the previous chapter 7 filing was made — not when the bankruptcy was eventually discharged.

#3: Bankruptcy Dismissal

Contrary to what some people have been led — or rather misled — to believe, having a bankruptcy dismissed within the last 180 days does not automatically render a new filing inadmissible, unless it was due to any of the following reasons:

  • violating a court order
  • abusing of the bankruptcy system (as determined by the court)
  • making a fraudulent bankruptcy filing (e.g. maxing out credit cards just prior to a filing in order to wipe out the debt)
  • requesting a dismissal because a creditor asked for the automatic stay to be lifted

#4: Means Test

This process involves comparing an individual’s monthly income vs. the median family income for their respective state (each state differs). If their monthly income is below the state median, then they have passed the means test. If their monthly income exceeds the state median, then they must further determine if they pass or fail the means test.

This further determination involves calculating all sources of income and qualifying expenses, and establishing the amount of disposable income. If this amount is below a threshold, then they have passed the means test. If it exceeds the threshold, then they fail the means test. In this situation, if the individual still wishes to file for bankruptcy, then they can only do so through a chapter 13 filing.

#5: Credit Counseling

Everyone who files for consumer chapter 7 bankruptcy must receive credit counseling from an agency that is approved by the government (the course is available in-class and online). It is not necessary to take this counseling prior to a filing. However, it must be taken at least 180 days prior to discharge.

Learn More

To learn more about the different tests and requirements involved in filing for consumer chapter 7 bankruptcy, contact the Law Office of Charles H. Huber today. We have more than 30 years of experience filing consumer bankruptcy cases. Our experience is your advantage!