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How Chapter 7 Works A chapter 7 case begins with the debtor filing a petition with the bankruptcy court serving the area where the individual lives or where the business debtor is organized or has its principal place of business...
Defaults of the Noteworthy
MC Hammer
(Stanley Burrell) 1962-_ , musician and entertainer, filed for Chapter 11 bankruptcy in 1996 because he did not have the income to support his lavish lifestyle and defend all the lawsuits that were filed against him.
Filing BankruptcyHow much does it cost?
Before beginning a petition we conduct a free consultation to determine the extent of your financial situation. For Chapter 7, we charge a flat fee based on the facts determined after this meeting. The court filing fees are '$'299 filing fee which are included with the flat rate we charge. If you wish to retain us after this meeting we require a '$'200 down payment to begin representation of you. After this we require that all fees be paid in full before filing since we become a dischargeable creditor, just like the others.
What about my credit?
If you have high debt your credit has already been affected. For most of our clients, discharging high debt improves their credit. Most of our clients receive many offers of credit as soon as they are discharged. Banks know you cannot file a Chapter 7 for another eight years, and with little or no debt you become a good credit risk. But we encourage you to avoid using credit and live on a cash basis. We encourage clients to borrow only for major purchases like home and car. Living on a CASH BASIS will set you free!
Can I keep one credit card off my bankruptcy for future use?
You are required under the bankruptcy code to disclose all assets and all debt. So you do have to list all your bills. As a practical matter, the credit card companies subscribe to services that notify them of all bankruptcy filings, even if they are not listed on the petition. Once they discover you have filed bankruptcy they will close your account, often after you have made another payment. You are much better off to just use a debit card for future reservations, Internet purchases etc.
Should I consider credit counseling?
If you have the ability to pay off your debt we encourage you to consider credit counseling. Beware of distant online firms that claim to pay your bills if you send them a monthly payment. Many will hold your money and ignore your creditors. Creditors can still sue you and garnish your wages. In addition we could determine during your initial meeting that negotiating with the creditors in an attempt to pay your debts could be better for you. Please visit our credit reduction services section of our website to learn more.
How long does it take?
We begin preparing your petition during your first meeting with our office, only after we determine if bankruptcy is the best fit for you. The ensure we have all necessary information during this initial meeting you should bring the information contained on the front page of our web site to this meeting. This means you do not do any paperwork. Once our full fee is paid and you sign off on the petition we file your case. Approximately 20 to 40 days later you will have a meeting with a court appointed trustee to review your petition. If they approve and file a no asset report your debts will be discharged about 8-9 weeks after that and you are done.
What is the new bankruptcy law about?
The new bankruptcy law started on October 17th, 2005. It is designed to force more debtors into a repayment plan under Chapter 13. It also requires two classes which can be completed online, in person or via telephone and has many procedural requirements like filing copies of your last 60 days worth of check stubs from work and your most recent tax return with the Court. Most people should still be able to file a Chapter 7 (full discharge).
What happens at the hearing?
There is no judge or courtroom. A Trustee swears you in and asks if your petition is correct, if you listed all your assets and debts and several other questions. If they have additional information needed for your case they will ask us to tender additional documents at a later date. A typical hearing lasts about five minutes. Creditors normally do not show up.
What is the difference between Chapter 7 and Chapter 13?
Chapter 7 provides for a complete discharge. Under Chapter 13, you pay back part of your debt over three to five years. With Chapter 13 you can repay your back home or car loans over time. But beware, many clients delay the inevitable by filing a Chapter 13, making some payments and then failing and having to file a Chapter 7 anyway.
What debt is discharged, what debt is not?Discharged:
Credit Card Bills
Medical Debt
Repossessions
Judgments
Collections
Back rent, utilities etc.
Miscellaneous Consumer Debt
Not Discharged:
Student Loans
Child Support
Most Back Taxes
Criminal fines, penalties and restitution
Will someone come to my home and take my property?
We have never had a client visited at home. If you have nonexempt property we can do some legal pre bankruptcy planning to protect it or negotiate a favorable buy back from the trustee. Most clients do not lose any property.
Will my doctor continue to treat me if I discharge his bill?
We have never been informed of a past client being refused medical treatment based on filing a petition.
Are judgments discharged?
Yes, most judgments are discharged in bankruptcy. Filing your case also stops wage garnishment, eviction, foreclosure and repossession.
What about wage garnishment?
Wage garnishments must stop even if you file your bankruptcy the day before payday. We are experienced in recovering these funds for you. Please provide us with the name and facsimile number of your payroll clerk so we can take care of this for you.
Will my name be published in the newspaper?
Some newspapers publish bankruptcies regularly, some sporadically. There is no way to keep it from being published, although it may not be anyway.
What are the most common issues that arise on bankruptcy cases? Motion for Relief on Secured Property (Usually home or car)
If you cannot pay your house or car payment, the creditor can foreclose, although your bankruptcy will slow them down. You would have to file a Chapter 13 case in order to delay repayment. But beware, many Chapter 13 cases fail, leaving the debtor in worse shape than before.
90 Days Before Filing
If you have large charges or cash advances within 90 days of filing, or have taken out new large loans, the creditor can object to discharge of this debt and you could be denied the right to discharge this debt.
Tax Return
You keep the first '$'700 per working debtor plus an amount equal to your Earned Income Tax Credit. Timing can be important late in the year to make sure you keep tax returns that exceed '$'700 per working filer. Most of our clients get back less than '$'2000 jointly, or '$'700 individually. If you have a particularly large return, you should discuss this with your attorney before filing. We are experienced in protecting these funds.
Pre-Acquisition Debt
If you own a home, had high dischargeable debt at the time of purchase, and have equity, you may have pre-acquisition debt. If so, we can tell you how this will affect your case. It should not keep you from going forward with bankruptcy.
High Income
If your income is significantly higher than your expenses, you may not be eligible for a Chapter 7 and may need to consider Chapter 13. This normally is not a problem for our clients. Of course, job loss can make almost anyone eligible for a Chapter 7.
Preference Payments
If you have made a large recent payment to family or a single creditor the trustee may be able to recover that money and distribute it evenly to all of your creditors. You should consult with your attorney before making preference payments.
How do I get started?
Contact us via email or phone so we can help you through this difficult time in your life.
How can I get a copy of my Credit Report?
The quickest way is at www.equifax.com. Beware: Not all creditors report and credit reports are not necessarily accurate.
What else should I do right away if I am going to file bankruptcy?
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Do not accumulate any more debt.
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Do not use credit cards or write any checks you may not be able to cover.
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Stop paying credit card and other bills you will discharge.
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Do not give away any property.
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Do not make preference payments to family members or others.
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Do not make any major financial moves without consulting with your attorney.
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Start collecting all your past due bills to bring with you to our office.
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If you owe more than your car is worth, start considering alternatives to reaffirmation.
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Many dealers are willing to lend to you once you are discharged from bankruptcy.
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It is ok for family to loan money to you for a car purchase after you file bankruptcy.
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You can purchase an inexpensive “old reliable” to drive temporarily.
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You can borrow a car from family to drive temporarily.
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Do start thinking about your financial objectives after bankruptcy. A good start is to set aside a portion of what you have been paying toward credit cards as a savings fund.
But I feel “Guilty” about filing bankruptcy.
This is the most common misunderstanding about bankruptcy. Courts view bankruptcy as the Responsible Approach if you can no longer pay your debt. Many people continue to acquire debt they know they will never repay. It is much better to recognize that you cannot repay your debt, “draw a line in the sand” and agree to be responsible for all future debt. Further, you must consider the future. High debt could keep you from affording a home for your family and funding your children’s college tuition. If you cannot fund your retirement you could become dependent on welfare. This is why courts want you to utilize your rights under bankruptcy law if you need to. We encourage you to use this as a real fresh start, adjust your spending and take control of your financial future. You can be financially happy after your bankruptcy if you are determined to. We look forward to helping you get a fresh start.
How can I rebuild my credit after bankruptcy?
In the past it was difficult to gain credit after filing bankruptcy. That has changed. After bankruptcy you should make every home, car and other installment payment on time. If you have substantial income and a manageable debt load you should be able to borrow in the future.
Buying a Home: It is possible to purchase a home right after bankruptcy although the interest rates tend to be higher. Of course if your debt is high now, you are either completely ineligible to buy a home or would pay high interest anyway. We recommend that you spend two years after your bankruptcy saving at least a 5% down payment and maintaining consistent employment with significant income exceeding expenses. So you should avoid taking on other debt prior to buying your home.
Buying a Car: Most dealers are happy to put you in a car as soon as you have your discharge (your discharge comes about 3 months after your date of filing) if you are otherwise eligible. It is important to shop around for the best deals and rates.
Credit Cards: Although you can get secured credit cards right away, we would encourage you to use a debit card on your bank checking account instead. Debit cards can be used for reservations and Internet purchases just like credit cards. We believe that credit cards are overrated and you are much better off making day to day purchases with money you already have then paying 20% or more interest on credit card debt.
Student Loans: Guaranteed student loans should not be affected by bankruptcy. Private loans may be affected, but chances are you would not be eligible for those anyway if you already have high debt. We have represented many college students who have gone on to borrow and continue normally with their studies after discharging their debt.
How much debt do I need to qualify for Bankruptcy?
There is no minimum debt requirement. We have had clients who have little or no income file Bankruptcy with debt that would be very manageable for someone with a substantial income, so it just depends on the individual. If you are not sure, email your amount of debt and your monthly income to us at or and we can give you our opinion.
What about co-signers?
Banks rely on co-signers to pay if you don‘t. Many clients ask us how to go about “getting co-signers off” their debt. You could call your bank and ask them nicely to remove the co-signer, but we are guessing they would fall off their chair laughing. If you do not pay your debt due to bankruptcy or any other reason, the bank will collect against the co-signer. However, if you are going to continue to make the payment the co-signer will not be affected.
Does my spouse have to file with me?
No. Many of our clients file bankruptcy alone. If you are both on the debt it usually is better to file together. You still only pay one attorney fee and one filing fee if you file jointly. If your spouse is not on the debt, there would normally be no reason for them to file bankruptcy.
If I file Bankruptcy alone, does the Court consider my spouses income?
Yes If you are married and you file bankruptcy, but your spouse does
not, the Court will consider the income of your spouse. So you should be prepared to tell us how much your spouse earns. Normally this is not a problem. However, if your spouse has unusually high income you will want to discuss that with us to find out if you are still eligible for Chapter 7.
How does my bankruptcy affect my non-filing spouse?
If you file bankruptcy alone, your spouse will be affected. You will be able to take them out to dinner more often since you will not be paying your unmanageable debt. Other than that, they should not be affected. Your bankruptcy should not appear on their credit report.
What do I need to bring to your office?
First don’t let this list scare you as we know it is long and very detailed. To ensure your best chance of succeeding in this process we need to have all necessary information to fill out your petition. If you have questions about this please give us a call or email.
1.
A completed credit counseling form. Here is a link to the list of approved agencies by the government. We do not recommend one over the other. If we file a bankruptcy this is required and best to have completed ASAP.
Complete list of all personal property owned and value (i.e. bed '$'50, TV '$'200, checking account number xxxx, '$'350 balance, insurance policy XXX cash value '$'45)
b.
List of any real estate you own.
i.
If you own we will need a current market value from appraisal or real estate agent and current balance owed on mortgage
ii.
If you owned in past two years I need when sold and how much money you received and whom it was transferred to.
c.
List of all household expensesa
i.
List of all house hold monthly expenses, be specific the creditor and monthly expense. (i.e. Comed @ '$'45 per month)
ii.
Copies of all household bills for living expenses.
d.
Most recent credit card statements for personal.
e.
List of all personal people who you owe money. Including Person, their address and amount owed.
f.
List of payments made to any creditor made in the past three months. When paid and the amount of each payment.
g.
List of payments made to insider creditors (family members/friends) made in the past one year. When paid and the amount of each payment.
h.
List of any property transfers you made to person/company to pay a debt.
i.
List of any property foreclosed or repossessed.
j.
List of closed financial accounts.
k.
Six months worth of pay stubs starting with most current pay period
l.
List of law suits you are involved in as either plaintiff or defendant
m.
Social security card and drivers license
n.
Most recent bank statement(s) for personal
o.
Car information regarding make, model, year, trim, condition for every car you and/or corporation owns.
p.
Last 4 years tax returns for you personally.
q.
If a corporation or business is involved we need the following records:
i.
Last 4 year tax returns
ii.
Inventories completed for past two years
iii.
List of any shareholder and/or officer of corporation. If bought out or no longer officer date this occurred.
iv.
List of who handled accounting records
v.
List of all equipment owned by corporation, date purchased, from whom purchased, amount purchased for, current value and current amount owed on equipment.
vi.
All financial records including loans outstanding, credit card bills, bank statements, accounts payable, accounts receivable etc…..
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