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Chapter 7 Bankruptcy

     Chapter 7 bankruptcy, formerly called "straight bankruptcy." eliminates your debts, but you might have to let the bankruptcy court liquidate (sell) some of your property for the benefit of your creditors if you have more property than can be exempted. Exempt property is property you are allowed to keep. For more information about exempt property please navigate to the exemptions page on this site.

billstack (20K)      The entire Chapter 7 bankruptcy procedure takes about four to six months. The filing fee for Chapter 7 cases is currently $299.00. Most debtors will only need to appear at on hearing called a section 341 hearing or meeting of creditors. At this hearing the trustee ask questions about your petition and finances and assets to determine if you have any non-exempt property or are ineligable to file a Chapter 7 bankruptcy.

     The Automatic Stay. Upon filing for bankruptcy an "automatic stay" immediately goes into effect. This stay instantly stops any lawsuit filed against you and most actions against your property by a creditor, collection agency, or government body. It will not prevent some actions such as criminal actions or actions to collect support. The automatic stay is not permanent. Creditors may ask the court to lift the stay and allow them to continue their collection actions. For example, if you are behind in your car payments the automatic stay temporarily stops repossession. Unless the payments are brought current, the creditor can ask the court to lift the stay and permit the repossession.

     The Trustee and 341 Hearing. Once a Chapter 7 petition has been filed, a trustee is appointed to wind up the economic affairs of the debtor. This trustee generally is an attorney or someone familiar with the bankruptcy laws and the courts. The trustee will conduct a meeting of creditors, usually within 40 days after the filing date. The debtor must appear at this meeting and must submit to an examination under oath by both the trustee and interested creditors. The examination generally is limited to questions concerning the extent and whereabouts of the debtor's assets. The meeting is informal and usually takes less than ten minutes to complete. 04_36_3_web (22K)

Your Discharge. Under Chapter 7 Bankruptcy, the debtor receives a discharge on all dischargeable debts.

There are several categories of debt, however, which may not be discharged. These include:

  • Debts for money, credit, etc. , obtained through fraud or false statement in writing.
  • Debts incurred within 90 days of filing that aggregate at least $500.00 for luxury goods or services.
  • Cash advanced aggregating more than $750.00 within 70 days.
  • Student loans, claims agains an individual was drunk or impaired due to drugs or any substance, and caused death or personal injury by operating a motor vehicle, vessel or aircraft, domestic support obligations (spousal support, alimony, child support).
  • Debts incurred to pay state and local taxes.
  • Debts incurred to pay fines and penalties and debts from homeowner association, condominium and cooperative dues.
     Secured Debts. If you've pledged property as collateral for a loan, the loan is called a secured debt. The most familiar examples of collateral are houses and automobiles. If you're behind on your payments, the creditor can ask to have the automatic stay lifted in order to repossess or foreclose on the property. On the other hand, if you are timely on your payments, you can keep the property and keep making payments as before -- unless you have enough equity in the property to justify its sale by the trustee.

     Generally to retain property which is secured you will sign a reaffirmation agreement. By signing a reaffirmation agreement a debtor can continue to pay for a car loan or a mortgage on their home.

     At the end of the bankruptcy process, all of your debts, except those non-dischargeable debts outlined above are eliminated (discharged). You will receive a Discharge of Debtor from the court. Once you obtain your discharge, you no longer legally owe your creditors for any discharged debts. Court supervision ends at this time.

     Not everyone is eligible to file a Chapter 7 bankruptcy. If you have substantial assets which are not exempt a Chapter 13 plan is advised. The bankruptcy laws impose an income test, called the "means test" to determine if you are eligible for a Chapter 7 filing. The test measures yours "current monthly income" against the median income for a family of your size in your state. If your income is too high you are ineligible to file under Chapter 7 and must file, if at all, under Chapter 13. The "means test" is discussed in greater detail on this site.
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Debt Relief Agency

We are a Macomb County Law Firm as well as a Debt Relief Agency helping people file for bankruptcy relief under the United States Bankruptcy Code.

Information

Information provided on Legal issues and bankruptcy questions are frequently complex and individual. The information contained here is intended to be educational only: it is not legal advice nor does it create an attorney client relationship between the viewer and the firm.