Chapter 7 Bankruptcy

Questions Answered in this video

What is chapter 7 Bankruptcy “fresh start” Bankruptcy?

That’s street jive for eliminating debt and hitting the reset button on adult life. A fresh start occurs when a Debtor receives a discharge of all of their debt. Not all debt is discharged in Chapter 7. We will look into which debts are and are not discharged by Chapter 7 a little later.

What are the pre-filing requirements?

You will need to provide the pay check stubs you received 60 days prior to filing, the last 2 years of federal income tax returns, take a credit counseling class (typically over the phone or internet), pay the filing fee and credit report fee (currently set at $338.00 and $30.00 for each). You may also need to provide bank statements for 2 months prior to filing, (some trustee’s do not require this).

You also need to provide all of the necessary information needed to fill out your paperwork (“the petition”), which you will have to review and sign.

What is the automatic stay?

The automatic stay grants you a shield that protects you from direct contact from collectors and collection proceedings. It puts a pause on debt collections, phone calls from creditors, court cases, foreclosures, and tax redemption dates to name a few. This lasts throughout your bankruptcy case, or unless a Judge says otherwise for an individual creditor.

What is the Fair Debt Collection Practices Act?

The Fair Debt Collection Practices Act is a federal law that limits what debt collectors can do when trying to collect a debt you owe. It doesn’t apply to the original creditor itself, only to third-parties such as collection agencies and collection attorneys. The law regulates how, when and how often a debt collector can contact you. It also prohibits debt collectors from using unfair, abusive or deceptive practices. And it also imposes requirements on debt collectors when they do contact you. The law provides remedies and penalties when an overly-aggressive debt collector violates the law.

What debts are eliminated in a Chapter 7 bankruptcy?

Generally speaking, most debts are discharged in Chapter 7. Medical bills, personal loans, payday loans, credit card debt, debt owed for repossessions, unpaid rent, and utilities are the most common examples for debts eliminated by bankruptcy. In certain situations debt originating from unpaid income taxes can be discharged too.

What debts survive a Chapter 7 filing?

Most debts will be eliminated in a Chapter 7 filing. However, some debts will not be discharged. Examples of those debts are Student Loans, Unpaid Income Tax, Unpaid Child Support, and most parking and red light tickets outside the Chicagoland area to name a few.

What is the meeting of creditors?

The meeting of creditors, or the 341 meeting, is a 5 to 10 minute meeting that takes place about 4 weeks after the case is filed. The meeting is with the Trustee of your case, you, your attorney, and any creditor that may wish to join the meeting. The meeting is to make sure you have been truthful and honest in your bankruptcy case and for you to answer any questions that the Trustee or creditor may have.

What property can I keep in a Chapter 7 bankruptcy?

Most debtors who qualify for Chapter 7 are able to keep their property. In some cases real estate with a large amount of equity may be taken and sold by a Chapter 7 trustee. The same is true of expensive cars that have large amounts of equity. This is determined on a case by case basis. You should consult with an attorney and be open and honest with them about what assets you have.

Will I ever get credit again after filing a Chapter 7 bankruptcy?

Absolutely! You will probably start getting offers for new credit after you receive your bankruptcy discharge, if not sooner. However, these will typically be offers with high interest rates. Over time, you should get better and better offers for new credit as well as better terms from lenders. Your Chapter 7 bankruptcy can stay on your credit reports for up to 10 years, but its impact on your credit scores will go down over time as long as you use credit responsibly.

What is the 2-hour personal financial management class?

The personal financial management course is the course a debtor must complete after their case is filed but before the sixty days after the 341 meeting of creditors is held. If the course is not completed within the allowed amount of time, the case is closed WITHOUT a discharge.

How much does it cost to file Chapter 7 bankruptcy?

Part of the cost of filing a Chapter 7 bankruptcy is the filing fee charged by the Bankruptcy Court. We have no control over that. Bankruptcy courts across the country charge the same fee. Right now it’s $338.00. We also charge an attorney’s fee to file a Chapter 7. It’s a flat-rate fee. There is no set fee. Rather, the attorney you meet with at the initial no-cost consultation will decide what the fee will be in your case. It really depends on the size of your case and how much work will be involved. We do offer a payment plan, where you can pay as little as $50.00 every two weeks to hire us. Once you’ve paid us the $338.00 court filing fee, we can file your case with the Bankruptcy Court, provided we have everything else we need from you.

Will my job find out that I filed for bankruptcy?

Your employer will not find out about your bankruptcy filing from the court or from your attorney. However, bankruptcy is subject to public records, and if they pull your credit report they will find out about it.

 


Chapter 7 Bankruptcy Overview

Also known as “Fresh Start” bankruptcy, chapter 7 allows a person to eliminate most or all of his debt while being allowed to keep whatever property he may have. Allows unsecured debt such as medical bills, personal loans and most credit card charges to be easily eliminated. In many cases, a person may keep their home or car (secured debt), provided that they continue to make current payments and are up to date on the loan. Chapter 7 does not eliminate: Student loans, except extreme hardship cases Debts for most taxes Debts for alimony, maintenance or support Debts for fines, penalties or criminal restitution Debts for personal injuries caused by driving intoxicated to receive a discharge in Chapter 7 bankruptcy, a person must file a bankruptcy petition with the clerk; appear at a meeting of creditors and be examined under oath with regard to assets and liabilities. A meeting date is usually schedule four to six weeks after the petition is filed.

 

Chicago Bankruptcy Lawyers’ Chapter 7 Checklist

  1. Find the right attorney.  You might think that finding the right attorney to handle your bankruptcy case would be simple.  After all, there are literally hundreds of bankruptcy attorneys around the country who claim to be able to handle Chapter 7 bankruptcy cases.  What you might find is that there are very few qualified bankruptcy attorneys in your local area.  Because there are so many holding themselves out as capable and so few that are, it makes it very difficult for you as the consumer or the debtor to find the right attorney.  I suggest you start with the American Bankruptcy Institute website.  That Institute is a national organization that encompasses not only attorneys but judges, creditors, and any other facet associated with bankruptcy. Once you realize that you have an attorney that you would like to interview, visit their office and find out what they are all about.  You will know relatively quickly after meeting with an attorney whether or not that is the right attorney to handle your case.  For example, does the attorney answer all of your questions sufficiently?  Does that attorney have information regarding bankruptcy either written, published, videos or referrals?  Does the lawyer’s office appear to be in good order?  Does it appear to be efficient?  Is the staff friendly and courteous and knowledgeable as well as the attorney?  Once you have found the attorney, it is now time to proceed to checklist item number two.
  2. Prepare for filing bankruptcy.  Now again, this might sound very simple.  What are you going to do, bring your information to the attorney and he’s going to prepare your case and everything is going to work out just fine, right?  Wrong.  To prepare for filing, you have together a series of documents.  First, you need to gather all of the information concerning your debts.  Don’t rely exclusively on a credit report.  Make sure that you provide any other additional bills that you might have received over the recent years.  Keep in mind that not everybody that you owe money to is going to be on your credit report.  There are many creditors who simply do not report to the bureaus, thus, make sure you do a little bit of work on your part to gather and compile a listing of all the people you owe money to. Second, you are going to want to gather your recent paycheck stubs.  If you don’t have paycheck stubs, you’re going to want to gather whatever proof of income that you do have.  It might be Social Security, it might be unemployment, it might be Worker’s Comp., it might be rental income; whatever the source might be you are to provide that to your attorney.  You also want to provide your most recent federal tax returns for filing Chapter 7.  Once you have all of this information handy, make an appointment with the attorney, sit down, do an interview and let the attorney ask you the necessary questions to prepare your case.In addition to preparing to file, you are going to want to submit to a credit counseling session.  The credit counseling session is anywhere from one hour to an hour and a half.  The price is approximately $10-$40.  And it must be done before a case can be filed.  Those are some of the items that you need to do to prepare for filing.
  3. You must appear before a Chapter 7 Bankruptcy Trustee to be examined under oath regarding these schedules and statement of financial affairs that were filed on your behalf.  If you failed to appear, your case will be dismissed.  At your appearance, you want to be truthful, yet you do not want to expound upon answers if they can be simply answered with a yes or a no.  The trustee’s job is to determine whether or not there are any nonexempt assets that could be administered for the benefit of creditors.  In 99% of Chapter 7 bankruptcy cases, there are no assets available for the unsecured creditors.  You must appear however and be examined under oath.  You must bring your photo ID and your Social Security card and be on time.
  4. After your meeting of creditors but before your case is coming to a conclusion, you want to make a decision with regard to reaffirming, redeeming or surrendering secured property.  Secured property is property that is not yet paid for and there’s an item that the creditor or lender can take back if you don’t pay.  The typical example is a house or a car.  When it comes to a house, you can continue to make voluntary payments to that creditor and still keep the item.  The bankruptcy code does not mandate that a secured creditor in terms of real estate, whether that creditor has to be real firm, redeemed or surrendered.  The debtor can simply make voluntary payments. With regard to vehicles, however, the bankruptcy code is very clear, that the debtor must either redeem, reaffirm or surrender.  Thus, there is no more ride through whereby the debtor discontinues making current payments without having to reaffirm.  Many vehicle creditors will repossess vehicles after the bankruptcy case is filed, even if the debtor is current, if the debtor has not reaffirmed.  So very important checklist item number four, you must reaffirm, redeem or surrender secured property.
  5. You must complete a two hour personal financial management instruction course prior to you receiving a discharge under Chapter 7.  A new rule has recently passed where you also must submit to a test or a quiz or other form of examination to prove that you have a sufficient understanding of the financial management instruction materials.  It used to be you just needed to take the class or watch a DVD and you weren’t tested and you didn’t have to pass.  Now, if you do not pass, that provider must make sure that you have sufficient knowledge of the material before giving you a passing grade.
  6. After your case is filed, and after it’s over, you must stay vigilant with regard to your credit accuracy.  I recommend that you pull each of your three credit bureaus once a year to make sure that the information contained in that bureau is truthful and accurate.  You want to make sure that after you’ve eliminated your debt and gone through the bankruptcy process that the information is accurate so that your score improves, you get better offers for credit and that you don’t fall into the habit of having negative items sit on your credit report.  There is nothing worse than going through bankruptcy, getting a fresh start and having negative items remain on your credit.  So be vigilant and stay active with regard to the accuracy of the information on your credit report.That is checklist item number six in this list of the Chicago Bankruptcy Lawyer’s Chapter 7 Checklist.
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