Chapter 7 Bankruptcy FAQs

 

These are some of the common questions regarding Chapter 7 Banckruptcy.

If you cannot find the answers you need below, or have a new question you think might be helpful to others, please CONTACT US for additional help.

- Robert C. Russell



What is a discharge?
Generally, obtaining a “discharge” is the major reason why people file Chapter 7.  A “Discharge Order” is an actual Order of the Bankruptcy Court that, when entered, releases a debtor from the personal obligation to repay the debtor's discharged debts.  The “Discharge Order” also orders creditors to not attempt to collect on a debt that has been discharged. 


Who is eligible?
Generally, everyone experiencing a financial hardship is eligible for Chapter 7 relief unless you:

(a) in the last eight years have already filed a Chapter 7 bankruptcy and received a discharge,

(b) in the last six years have already filed a Chapter 13 bankruptcy and received a discharge – unless you paid 70% of your unsecured claims in that case, or

(c) make too much money to qualify for Chapter 7 relief and/or a “substantial abuse” of the bankruptcy system would result, i.e., it would not be “fair” for you to be granted a discharge.

When am I protected from my creditors?
You are protected immediately upon filing.  The filing of a Chapter 7 case automatically stays or stops virtually all collection and other legal proceedings that have been filed against the debtor.  A few days after a Chapter 7 case is filed, the Court will mail a notice to all creditors ordering them to refrain from any further action against the debtor.  If the debtor cannot wait this long, it is permissible for the debtor to notify one or more of the creditors of the filing of the case.  Any creditor who intentionally violates this Court order may be liable to the debtor for damages.  The most common actions not affected by the filing of a Chapter 7 case are criminal proceedings and actions for the collection of alimony, maintenance, or support.


When are debts discharged?
The basic rule is that all debts are discharged (wiped out, released, etc.) unless they fall into one of the several exceptions including, but not limited to:  

Fraud / Theft:  Debts resulting from a successful effort to obtain money, property, services, or credit by means of false pretenses, fraud, or a false financial statement (NOTE: Fraud is presumed to exist if you put more than $1,150 on one single card in the 60 days before you file).   

Child support/alimony:  Debts for alimony, maintenance, or child support. 

Intentional injury:  Debts for intentional or malicious injury to the person or property of another. 

Taxes:  Debts for certain taxes such as income and property taxes. 

Fines and penalties:  Debts for certain fines or penalties, including traffic tickets, payable to and for the benefit of a governmental unit. 

Student loans:  Debts for student loans (unless not discharging the debt would impose an undue hardship on the debtor and the debtor's dependents). 

Intoxication:  Debts arising from a judgment or court decree entered against the debtor for damages resulting from the operation of a motor vehicle while legally intoxicated. 

Credit Card - Taxes.  Credit card balances to the extent that the balance on the card is the result of paying otherwise nondischargeable taxes.  

Certain Spousal debts:  Debts owed by a debtor to a former spouse that qualify as a "domestic support obligation."   That would include child support, alimony and property settlements including a debtor's obligation to pay certain debts for the ex-spouse. 

AFDC.  Debts owed to a governmental entity to reimburse AFDC payments made to a dependent.

What Assets do I get to keep?
Generally speaking, most people get to keep all of their assets.  The reason for this is that the value of most debtors’ assets does not exceed the exemption protection limits.  In other words, most debtors do not have “too much stuff.”  If you have an item or items that are not exempt, the Chapter 7 Trustee may, generally, takes possession of that item, sell it, and pay administrative costs and money to your unsecured creditors.  Generally, debtors in 95% of all cases do not lose a thing.


Can I lose my property?
There are several ways to lose property in a Chapter 7.  The first is if that property is not “exempt,” i.e., your value/equity in the property exceeds the amount that you can protect by law from your creditors.  The second is if you try to hide it from the Chapter 7 Trustee and he finds out about it.  The third is if the asset is collateral for a loan, and the creditor repossesses the property in partial payment for the debt.  (Repossession does not normally occur until after the bankruptcy is complete.) 

Will I ever be able to buy another house?
Most mortgage companies tell us that after 2 years, bankruptcy doesn't hurt your chances of buying a home, so long as you are otherwise qualified. 


What happens to my credit?
A Chapter 7 bankruptcy is typically noted on your credit report for 10 years.  The debts listed in your bankruptcy should be noted on your credit report as “zero balance due” and/or “included in bankruptcy.”  However, filing bankruptcy does NOT mean that your credit is “ruined” for 10 years.  First, you will likely be surprised how easy it is to get credit after you file for bankruptcy (not that you should want a lot of credit anyway!).  Secondly, if you need to file for bankruptcy relief, your credit is typically better than if you did not file; not filing and continuing to add negative entries to your credit report most certainly does not improve your credit rating.


Who will know I filed for bankruptcy?
Bankruptcy is a matter of public record.  However, generally, it is not publicized beyond notice to your creditors and co-debtors.  Employers and newspapers are NOT generally notified of the bankruptcy.


Isn't bankrupcy "immoral"? Am I just "taking the easy way out"?
Some people argue that filing bankruptcy is taking the easy way out.  I suppose that it could be the ‘easy way out’ if you never tried any other way to pay your debts.  However, most people try their best to avoid bankruptcy.  Some people even sacrifice their health and relationships in an effort to pay bills that are beyond their ability to pay.  Bankruptcy is a gut-wrenching experience that most people try very hard to avoid.   

Also, bankruptcy is a legal remedy made available by your United States’ Constitution.  It was recognized by our Founding Fathers that there are certain circumstances where a person or family simply needs relief from their debts.  And bankruptcy relief is only available to people that actually qualify for assistance. 

Is it wrong to file bankruptcy?  No, not if you need the help.  You should not be forced into virtual life-long slavery to your creditors because either you had a medical emergency, loss of employment, or even made bad financial decisions. 

Will I have to go to court?
A debtor does not generally go to court.  However, there is as administrative hearing called a "Meeting of Creditors" or “341 Meeting” that occurs about 20-40 days after the case is filed.  At this hearing, the Chapter 7 Trustee places the debtor under oath and asks questions about the debtor’s money, property, and debts.  Generally, a debtor’s creditors do not attend this hearing.  However, if one does, the Trustee will give the creditor only a few minutes to ask a few quick questions.  Most 341 Meetings take only 3-5 minutes.  To receive a discharge, you must bring a picture ID and a document showing you social security number to your 341 Meeting.


How long does a Chapter 7 Bankruptcy take?
Once the bankruptcy is filed, the entire Chapter 7 process takes about three months.  During this process, you must attend one “341 Meeting.”  The rest of the time – another 60 days - you are usually just waiting for the time to pass until entry of your Discharge Order.

How can I get in trouble filing my Chapter 7 Bankruptcy?
The following people should expect “problems” in bankruptcy: 

(a)         Persons who conceal, transfer, or destroy their property with the intent to defraud their creditors or the Trustee in the Chapter 7 case. 

(b)         Persons who conceal, destroy, or falsify records of their financial condition or business transactions. 

(c)         Persons who make false statements or claims in their Chapter 7 case, or who withhold recorded information from the Trustee in the case. 

(d)         Persons who fail to satisfactorily explain any loss or deficiency of their assets. 

(e)         Persons who refuse to answer questions or obey orders of the Bankruptcy Court, either in their case or in the case of a relative, business associate, or corporation. 

(f)      Persons who have engaged pre-filing activity with intent to defraud creditors. 

How do I contact you if I have more questions?
If you have any additional or follow up questions, or are ready to make an appointment to discuss your particular options, please give us a call at:
360-882-8890, contact us from this website or send us an email at:
info@RRLawGroup.com

Other Helpful linkns, forms, worksheets and Information:

• General Information Form
• Debt forms
• Business Budget Form
• FREE Annual Credit Report
• Equifax Home Page
• Experian Home Page
• Trans Union Home Page
• Mortgage Modifications
• Short Sale Negotiations
• Washington State Bar
• Clark County Bar
• Natl. Bankruptcy Assoc.

Additional Questions or for a FREE Initial Consultation simply CONTACT us from this web site or give us a call at: 360-882-8990.
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