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. The disclosures also require the debtor to sign and file a statement of his or her current income and expenses which shows that the balance of income paying expenses is sufficient to pay the reaffirmed debt.
If the balance is not enough to pay the debt to be reaffirmed, there is a presumption of undue hardship, and the court may decide not to approve the reaffirmation agreement. Unless the debtor is represented by an attorney, the bankruptcy judge must approve the reaffirmation agreement. If the debtor was represented by an attorney in connection with the reaffirmation agreement, the attorney must certify in writing that he or she advised the debtor of the legal effect and consequences of the agreement, including a default under the agreement.
The attorney must also certify that the debtor was fully informed and voluntarily made the agreement and that reaffirmation of the debt will not create an undue hardship for the debtor or the debtor's dependants. The Bankruptcy Code requires a reaffirmation hearing if the debtor has not been represented by an attorney during the negotiating of the agreement, or if the court disapproves the reaffirmation agreement.
The debtor may repay any debt voluntarily, however, whether or not a reaffirmation agreement exists. An individual receives a discharge for most of his or her debts in a chapter 7 bankruptcy case. A creditor may no longer initiate or continue any legal or other action against the debtor to collect a discharged debt. But not all of an individual's debts are discharged in chapter 7.
Filing for bankruptcy comes with costs other than attorneys' fees. Bankruptcy filers must take two educational courses and pay a bankruptcy filing fee although low-income filers can often get both waived. The bankruptcy filing fee is an amount due when you file your initial paperwork with the court clerk. The fees change periodically, but you can find the current cost for both Chapter 7 and Chapter 13 cases in Bankruptcy Filing Fees and Costs. Otherwise, you might be able to pay the fee in up to four installments.
To apply for either, you'll complete and submit the official request forms along with your initial bankruptcy petition.
The court will notify you if the judge approves the waiver or installment arrangement. If you opt for an installment plan, it's essential to make timely payments. Otherwise, the court might dismiss your bankruptcy filing. You'll have to file a motion asking the court to reopen your case, as well as pay the entire filing fee. A fee waiver isn't available in Chapter The automatic stay order that stops creditors from collecting doesn't go into effect until you file the bankruptcy case.
However, once you hire an attorney, you can cut down on annoying calls by instructing creditors to call your lawyer instead of you. However, even though many lawyers offer payment plans, they won't file your case until all fees are paid in full—and for a good reason. Any amount owed to your attorney would get wiped out in the bankruptcy filing.
Also, keep in mind that this approach will cut down on annoying calls while you save for your attorneys' fees. Still, it won't stop creditors from engaging in other collection activities, such as garnishing your wages or levying against a bank account. You aren't required to have an attorney when filing for bankruptcy relief.
Whether you should, however, will depend on how complicated your case is and how comfortable you are researching the law and filing on your own. In general, people who have a simple case will be better able to complete a Chapter 7 bankruptcy. For instance, if your income is below the state median, you have little or no property, you can wipe out all or most of your debt, and your creditors aren't likely to allege fraud against you, preparing your case will be possible.
However, keep in mind that filing for bankruptcy without a lawyer isn't easy. Bankruptcy laws are involved. If you aren't willing to put in the necessary research time, you'll risk losing unprotected nonexempt assets.
Or, you might learn that none of your debts will be discharged in bankruptcy. In some states, the information on this website may be considered a lawyer referral service.
Please reference the Terms of Use and the Supplemental Terms for specific information related to your state. Talk to a Lawyer. Grow Your Legal Practice. Meet the Editors. Here are the most common mistakes people make when filing for bankruptcy without an attorney. Prebankruptcy Considerations In many cases, problems arise even before the consumer files for bankruptcy.
Not needing to file. Some people file for bankruptcy because they don't understand what bankruptcy can and cannot do, and what their alternatives are. For instance, the filer might hope it will help them wipe out debts that don't go away in bankruptcy. Filing the wrong chapter type. For most consumers, the logical choices are Chapter 7 bankruptcy and Chapter 13 bankruptcy.
Each type has specific benefits that solve particular problems. Also, property is treated very differently in each chapter. For example, if you want to save your home from foreclosure, Chapter 13 might be your best bet.
If you have low income and no assets, Chapter 7 may be the way to go. If you file for the wrong chapter, you might lose valuable property, or end up not discharging wiping out certain debts Filling Out Bankruptcy Paperwork Even if the debtor chooses the correct chapter, pitfalls abound in the paperwork phase of bankruptcy.
Why Are You Filing for Bankruptcy? Consider talking to a lawyer as soon as possible if: your home is in foreclosure you're facing wage garnishment your landlord is evicting you, or you're involved in a lawsuit. Should You Wait to File for Bankruptcy? Here are some of the debts you'd be able to discharge: credit card balances car loans if you plan on letting go of the car medical bills past-due rent utility bills payday and other personal loans, and money owed on leases and contracts, like gym memberships.
Here are some examples. You can't erase spousal or child support arrearages in bankruptcy—you'd remain responsible for them after the case. You can discharge tax debt older than three years if it meets other qualification requirements.
DUI and fraud-related debts aren't dischargeable if a creditor objects. Marital property settlement obligations and tax debt paid with a credit card aren't dischargeable in Chapter 7 but are in Chapter Student loans are also nondischargeable, but if it would be unlikely you could ever pay them back because of undue hardship, it is possible to wipe out student loans in bankruptcy.
However, you'd have to prove it by filing a type of lawsuit called an adversary proceeding, a complicated endeavor without legal help. If you have any of these obligations, you'll want to talk with a lawyer. If one of the following situations applies, you probably won't want to file without consulting a lawyer first: you have a claim or lawsuit against someone you haven't received your tax refund yet you might receive an inheritance soon, or you're an independent contractor or have an ownership interest in a business.
Do You Qualify for Chapter 7 Bankruptcy? Not everyone is entitled to a Chapter 7 discharge. You'll have to prove that either: your household gross income is below a certain amount, or you don't have enough money to make reasonable creditor payments through a Chapter 13 repayment plan. Are You Married? Consulting With a Lawyer If you don't have any of the problems we've listed above, it's likely that your case is simple enough to file without a lawyer.
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