Bankruptcy
“Bankruptcy gives to the honest but unfortunate debtor…a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt.”
— US Supreme Court in Local Loan Co. v. Hunt, 292 U.S. 234, 244 (1934)
Chapter 7 Bankruptcy
A Chapter 7 bankruptcy is a type of bankruptcy that can quickly clear away debts. It's also called a liquidation bankruptcy because you will have to sell nonexempt possessions or assets to repay your creditors.
Another name for it is a straight bankruptcy because there are no drawn-out repayment plans. Although it's often a last resort, understanding how a Chapter 7 bankruptcy might help you could be important if you're struggling with debt.
“Bankruptcy represents a longstanding commitment in this country to helping people get a fresh start. This principle has never been giving only certain people a fresh start.”
— TIM JOHNSON
What’s the difference between Chapters 7, 11, and 13?
Are there more chapters out there?
The Bankruptcy Code appears in title 11 of the United States Code, beginning at 11 U.S.C. 101. Its principal chapters (7, 11, 12, 13 and 15). Over the years people started referring to these various sections of law as “Chapter 7,” “Chapter 11,” “Chapter 13” etc.
CHAPTER 7 BANKRUPTCY:
This is a liquidation proceeding available to consumers and businesses. Those assets of a debtor that are not exempt from creditors are collected and liquidated (reduced to money), and the proceeds are distributed to creditors. A consumer debtor receives a complete discharge from debt under Chapter 7, except for certain debts that are prohibited from discharge by the Bankruptcy Code.
CHAPTER 11 BANKRUPTCY:
This bankruptcy provides a procedure by which an individual or a business can reorganize its debts while continuing to operate. The vast majority of Chapter 11 cases are filed by businesses. The debtor, often with participation from creditors, creates a plan of reorganization under which to repay part or all of its debts.
CHAPTER 12 BANKRUPTCY:
This allows a family farmer or a fisherman to file for bankruptcy, reorganize its business affairs, repay all or part of its debts, and continue operating.
CHAPTER 13 BANKRUPTCY:
Often called a wage-earner bankruptcy, it is used primarily by individual consumers to reorganize their financial affairs under a repayment plan that must be completed within three or five years. To be eligible for Chapter 13 relief, a consumer must have regular income and may not have more than a certain amount of debt, as set forth in the Bankruptcy Code.
CHAPTER 15 BANKRUPTCY:
This provides debtors, creditors, and other parties in interest involved in insolvency cases in foreign countries a mechanism by which they can assert their rights. Generally, a chapter 15 case is supplementary to a primary case or proceeding commenced in a debtor's home country. One of the primary goals of this chapter is to encourage cooperation and communication between the courts of the United States and parties in interest and foreign courts and parties in interest in cross-border cases.
This firm focuses on “fresh start” Chapter 7 bankruptcies.
Do I need an attorney to file for bankruptcy?
To get the full benefit of the protection under Chapter 7 of the bankruptcy law you should seek advice from a qualified attorney. Without representation it can be difficult just knowing where to start.
Nicholas Ratush will assist you through the process and will advise you on every step from filing to discharge. There may be cheaper attorneys out there but if we are handling your case, you can be assured that you file will get all the necessary attention it requires.
How does Chapter 7 work?
If you are seriously behind on your bills and are struggling to make ends meet, Chapter 7 might help you reset your finances and start anew. It can discharge certain debts—you don't need to pay them anymore—and many people have "no-asset" cases, meaning they get to keep all their belongings.
In short, here's how a Chapter 7 bankruptcy works once you file for bankruptcy:
1.The court automatically places a temporary stay on your debts. The stay can stop debt collection efforts, home foreclosure, wage garnishment, property repossession, eviction and utility turn-off.
2. The trustee is appointed to review your finances and oversee your Chapter 7 bankruptcy. They can sell certain property the bankruptcy won't let you keep (nonexempt property) and use the proceeds to repay your creditors. This might include vehicles, homes, jewelry, collectibles and money in your bank account. The trustee will pay off unsecured debts that aren't dischargeable first—called priority unsecured claims.
3. You can keep exempt property. You won't lose everything. But the list of property you don't have to sell (exempt property), and the total value that you can exempt, varies by state. Some states let you choose between their exemption list and the federal exemptions.
4. The court discharges your remaining debt. The court discharges the remaining debt that's included in your bankruptcy.
5. Some types of debt generally aren't dischargeable through a Chapter 7 bankruptcy, including state and federal taxes, child support, alimony, court fees and student loans.
Who qualifies for Chapter 7 bankruptcy?
There are a few requirements you'll need to meet to file for a Chapter 7 bankruptcy
CREDIT COUNSELING:
You generally must complete an individual or group credit counseling course from an approved credit counseling agency within 180 days before filing.
INCOME LIMITS:
Either the average of your monthly income during the previous six months must be less than the median income for the same-sized household in your state or you must pass a means test. A bankruptcy means test determines if your disposable income is high enough to make partial payments to unsecured creditors. If you don't pass the means test, you may still be able to file a Chapter 13 bankruptcy.
NO RECENT BANKRUPTCIES:
You can't have filed a Chapter 13 bankruptcy during the past six years or a Chapter 7 bankruptcy during the past eight years. If you tried to file a Chapter 7 or 13 bankruptcy and your case was dismissed, you have to wait at least 181 days before trying again.
NO FRAUD:
You may be eligible to file, but a court could dismiss your case if it determines you're trying to defraud your creditors. For example, if you take out a loan or use credit cards with the intent of then declaring bankruptcy to avoid repaying the debt.
Are all debts discharged in a Chapter 7 bankruptcy?
No. There are certain debts that are non-dischargeable under the current set of laws.
Those debts include child support, spousal support obligations, student loans, judgments for damages resulting from drunk driving accidents, most secured obligations and most unpaid taxes.
Do I have to give up all of my property to get a clean start?
In short, no. During our initial consultation we will review a schedule of your assets and liabilities and prepare a plan for maximizing various exemptions available to you under the bankruptcy code.
You may even be able to keep the equity in your home.
How do I get started?
The first step to dealing with a problem is understanding it. Prior to our first meeting you should gather the following documents:
Tax returns for the three prior years;
All bank statements for the past 12 months;
All pay-stubs for the past 6 months;
A recent credit report;
All notices you’ve received in connection with any claims against you and pleadings/lawsuits filed against you;
Based on these documents we can determine if a bankruptcy could help you. Once you have these documents in hand, please contact us to schedule an appointment.