Chapter 7 Bankruptcy Lawyer

Filing for bankruptcy can be a tough decision, but sometimes it can be the only way you can achieve financial peace. Bankruptcy can also enable you to start your life afresh and leave you with valuable lessons to use in your future endeavors. There are many types of bankruptcies you can file for, depending on what suits your circumstances. One of the quickest ways of getting rid of debt is chapter 7 bankruptcy. Filing for bankruptcy can help you quickly get rid of overwhelming debt. Hiring a bankruptcy lawyer during the process is advisable. The guidance of a bankruptcy attorney simplifies the process for you and helps you safeguard your interests and rights in court.

What Is Chapter 7 Bankruptcy?

Chapter 7 bankruptcy works on the principle of liquidation. Unlike chapter 13 bankruptcy, the debtor is not required to submit a repayment plan. Instead, the debtor needs to hand over their non-exempted assets to a bankruptcy trustee who sells them and uses the proceeds of the sales to pay creditors following the bankruptcy code. Therefore, debtors should be wary that they would be required to give up their assets when filing for Chapter 7 bankruptcy.

Chapter 7 bankruptcy wipes off unsecured debts such as medical bills, credit card bills, and personal loans. However, some forms of debts such as student loans, alimony, child support, back taxes, and court judgments are not eligible for a waiver under this category of bankruptcy. Additionally, the filing of chapter 7 bankruptcy negatively impacts the debtor’s credit report.

Eligibility Criteria for Chapter 7 Bankruptcy

Debtors qualifying the following criteria are eligible for filing chapter 7 bankruptcy:

  • Individuals, business entities, partnerships, and corporations are all eligible for filing chapter 7 bankruptcy.
  • The debtor must pass the means test. By considering the income, expenditure, and family size of the debtor, the test determines whether the debtor has enough disposable income to repay debts.
  • The debtor must not have completed a chapter 7 bankruptcy discharge in the past 8 years or a chapter 13 bankruptcy discharge in the past six years.
  • A debtor is not qualified to file for a chapter 7 bankruptcy if they have filed a chapter 7 or chapter 13 bankruptcy petition in the past 180 days that was dismissed by the court due to their non-compliance or non-appearance or was dismissed by them because creditors sought legal help to recover property that was used as collateral.

How to File for Chapter 7 Bankruptcy?

The filing of chapter 7 bankruptcy and its completion takes six months. The process involves the following steps:

Credit Counselling:

The debtor is required to complete credit counseling from an EOUST-approved agency 180 days before filing the chapter 7 bankruptcy petition.

Filing the Petition:

Chapter 7 bankruptcy begins once a debtor files a petition. While filing the petition, the debtor is required to submit the following documents:

  • A list of all assets and liabilities
  • Current income and expenditure documents
  • Statement of financial affairs
  • Unexpired leases and executory contracts
  • Latest tax returns
  • Certificate of credit counseling
  • Monthly net income along with an anticipated increase in income or expenditure
  • List of all creditors and the debt owed to each of them
  • A list of all the property the debtor owns
  • The source, frequency, and amount of the debtor’s income

Filing the petition automatically initiates a stay or stop against creditor collection efforts.

A Trustee Is Assigned to the Case:

Once the petition is filed and all the necessary documents are submitted, a trustee is appointed by the court, who takes charge of managing the case. The trustee is responsible for administering the case and liquidate the non-exempted assets for disbursing the debt to the creditors.

Creditors Meeting:

Once a trustee is appointed, he calls for a meeting of the creditors with the debtor. The meeting is held to discuss the debtor’s finances and bankruptcy forms. Creditors may use this as an opportunity to counter the debtor’s bankruptcy claims and voice any problems they may have with the plan. Additionally, the trustee questions debtors whether they are aware of the consequences of seeking a discharge under chapter 7 bankruptcy.

Non-exempt Property Handled:

The trustee handles the responsibility of selling the debtor’s assets and disburses the proceeds to the creditors. The trustee in charge determines whether the assets are worth selling. Non-exempt proceeds can be anything from jewelry to equity. Typically, most chapter 7 bankruptcy cases are no-asset cases where there are no non-exempt assets to liquidate.

Payment of Secured Debts:

The debtors may be ordered to pay off their secured debts by handing over the property or asset held as collateral. If the debtor wants to retain the property, they can do so by paying the creditor the current value of the collateral or reaffirming the debt. This can be done by excluding the debt from the bankruptcy.

Education Course:

Before the case is discharged, a debtor mandatorily needs to undergo a financial planning course. The debtor needs to complete the course under an EOUST-approved credit agency.

Bankruptcy Discharge:

Bankruptcy discharge begins three to six months after the filing of the petition. After the debts are settled, and the other eligible debts are forgiven, the case is closed.

When to Opt for Chapter 7 Bankruptcy?

You should opt for chapter 7 bankruptcy if:

  • You don’t own many assets
  • Your debts amount to more than 40% of your annual income
  • If you have huge unsecured debts that are required to be paid
  • If paying off the debt would take more than five years despite taking extreme measures

Why Hire a Chapter 7 Bankruptcy Attorney?

Hiring a chapter 7 bankruptcy attorney can help you in the following ways:

  • First, a bankruptcy lawyer can help you plan and prepare for bankruptcy. With a lawyer by your side, you can explore all the debt relief options at your disposal and choose the type of bankruptcy that suits your financial needs and situation.
  • A bankruptcy attorney can help you complete the means test by educating you about any exceptional situations that can influence the test result.
  • Filing the petition and other related paperwork can be cumbersome for a layman. A chapter 7 bankruptcy attorney can help you prepare for bankruptcy and filing the petition. Missing out on information or filing false information can cost you dearly.
  • With a chapter 7 bankruptcy attorney by your side, you can comply with bankruptcy codes and laws. In addition, the attorney takes charge of the communication with the courts and the trustee and ensures that the critical information reaches the concerned authorities.
  • In certain cases, creditors may continue to demand the debt that the court discharges. But, again, a bankruptcy lawyer is well-equipped to help you address the issue and file a petition for injunctive relief to stop creditors.

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