In a Chapter 7 bankruptcy you wipe out your debts and get a “Fresh Start”. Chapter 7 bankruptcy is a liquidation where the trustee collects all of your assets and sells any assets which are not exempt. (see New York Exemptions) The trustee sells the assets and pays you, the debtor, any amount exempted. The net proceeds of the liquidation. In , Congress overhauled the bankruptcy laws. Those changes made it harder for some people to file for Chapter 7 bankruptcy; high income filers that can't pass the means test, will have to repay at least some of their debt in a Chapter 13 karacto.xyz addition, the law requires all bankruptcy filers to get credit counseling before they can file a bankruptcy case -- and additional. In , Congress overhauled bankruptcy law and those changes made it harder for some to file for Chapter 7 bankruptcy. Under the law passed in , the first step in figuring out if you could file for Chapter 7 is to measure your current monthly income against the median income for a household of your size in your karacto.xyz: Ken Lamance.
Chapter 13 allows for a repayment of debts by the filer. The new bankruptcy rules state a few new requirements to file under Chapter The old bankruptcy rules allowed the filer to choose whether he wants to file under Chapter 7 or Chapter Now, the filer must look at his income and must earn less than the median income for his household size in his state.
If the income of the filer is less than the median income, the filer may file for Chapter 7 bankruptcy. The Chapter 7 bankruptcy filer must also be unable to pay back his debts under a Chapter 13 repayment plan. During this meeting, the trustee puts the debtor under oath, and both the trustee and creditors may ask questions. The debtor must attend the meeting and answer questions regarding the debtor's financial affairs and property.
If a husband and wife have filed a joint petition, they both must attend the creditors' meeting and answer questions. Within 10 days of the creditors' meeting, the U. It is important for the debtor to cooperate with the trustee and to provide any financial records or documents that the trustee requests.
The Bankruptcy Code requires the trustee to ask the debtor questions at the meeting of creditors to ensure that the debtor is aware of the potential consequences of seeking a discharge in bankruptcy such as the effect on 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.
Some trustees provide written information on these topics at or before the meeting to ensure that the debtor is aware of this information. In order to preserve their independent judgment, bankruptcy judges are prohibited from attending the meeting of creditors. In order to accord the debtor complete relief, the Bankruptcy Code allows the debtor to convert a chapter 7 case to a case under chapter 11, 12, or 13 6 as long as the debtor is eligible to be a debtor under the new chapter.
However, a condition of the debtor's voluntary conversion is that the case has not previously been converted to chapter 7 from another chapter. Thus, the debtor will not be permitted to convert the case repeatedly from one chapter to another.
When a chapter 7 petition is filed, the U. If all the debtor's assets are exempt or subject to valid liens, the trustee will normally file a "no asset" report with the court, and there will be no distribution to unsecured creditors.
Most chapter 7 cases involving individual debtors are no asset cases. But if the case appears to be an "asset" case at the outset, unsecured creditors 7 must file their claims with the court within 90 days after the first date set for the meeting of creditors.
A governmental unit, however, has days from the date the case is filed to file a claim. In the typical no asset chapter 7 case, there is no need for creditors to file proofs of claim because there will be no distribution. If the trustee later recovers assets for distribution to unsecured creditors, the Bankruptcy Court will provide notice to creditors and will allow additional time to file proofs of claim.
Although a secured creditor does not need to file a proof of claim in a chapter 7 case to preserve its security interest or lien, there may be other reasons to file a claim.
A creditor in a chapter 7 case who has a lien on the debtor's property should consult an attorney for advice. Commencement of a bankruptcy case creates an "estate.
It consists of all legal or equitable interests of the debtor in property as of the commencement of the case, including property owned or held by another person if the debtor has an interest in the property. Generally speaking, the debtor's creditors are paid from nonexempt property of the estate. The primary role of a chapter 7 trustee in an asset case is to liquidate the debtor's nonexempt assets in a manner that maximizes the return to the debtor's unsecured creditors.
The trustee accomplishes this by selling the debtor's property if it is free and clear of liens as long as the property is not exempt or if it is worth more than any security interest or lien attached to the property and any exemption that the debtor holds in the property. The trustee may also attempt to recover money or property under the trustee's "avoiding powers. In addition, if the debtor is a business, the bankruptcy court may authorize the trustee to operate the business for a limited period of time, if such operation will benefit creditors and enhance the liquidation of the estate.
Section of the Bankruptcy Code governs the distribution of the property of the estate. The debtor is only paid if all other classes of claims have been paid in full. Accordingly, the debtor is not particularly interested in the trustee's disposition of the estate assets, except with respect to the payment of those debts which for some reason are not dischargeable in the bankruptcy case.
The individual debtor's primary concerns in a chapter 7 case are to retain exempt property and to receive a discharge that covers as many debts as possible. A discharge releases individual debtors from personal liability for most debts and prevents the creditors owed those debts from taking any collection actions against the debtor.
Because a chapter 7 discharge is subject to many exceptions, debtors should consult competent legal counsel before filing to discuss the scope of the discharge. Generally, excluding cases that are dismissed or converted, individual debtors receive a discharge in more than 99 percent of chapter 7 cases. In most cases, unless a party in interest files a complaint objecting to the discharge or a motion to extend the time to object, the bankruptcy court will issue a discharge order relatively early in the case — generally, 60 to 90 days after the date first set for the meeting of creditors.
The grounds for denying an individual debtor a discharge in a chapter 7 case are narrow and are construed against the moving party. Among other reasons, the court may deny the debtor a discharge if it finds that the debtor: failed to keep or produce adequate books or financial records; failed to explain satisfactorily any loss of assets; committed a bankruptcy crime such as perjury; failed to obey a lawful order of the bankruptcy court; fraudulently transferred, concealed, or destroyed property that would have become property of the estate; or failed to complete an approved instructional course concerning financial management.
Secured creditors may retain some rights to seize property securing an underlying debt even after a discharge is granted. Depending on individual circumstances, if a debtor wishes to keep certain secured property such as an automobile , he or she may decide to "reaffirm" the debt. A reaffirmation is an agreement between the debtor and the creditor that the debtor will remain liable and will pay all or a portion of the money owed, even though the debt would otherwise be discharged in the bankruptcy.
In return, the creditor promises that it will not repossess or take back the automobile or other property so long as the debtor continues to pay the debt. If the debtor decides to reaffirm a debt, he or she must do so before the discharge is entered. The debtor must sign a written reaffirmation agreement and file it with the court. The Bankruptcy Code requires that reaffirmation agreements contain an extensive set of disclosures described in 11 U.
Among other things, the disclosures must advise the debtor of the amount of the debt being reaffirmed and how it is calculated and that reaffirmation means that the debtor's personal liability for that debt will not be discharged in the bankruptcy.
In other words, if you are three or four months behind, then you must pay the back payments which are due in order to reaffirm it. You can selectively reaffirm your debts — you can state that you wish to keep the house and the furniture, but that you want the car and the jewelry to go back to the respective Creditors.
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