Source: http://dianedrain.com/bankruptcy-articles/for-consumers-and-debtors/chapter-7-questions/
Timestamp: 2017-05-27 04:31:12
Document Index: 747075721

Matched Legal Cases: ['§707', '§707', '§521', '§111', '§362', '§109', '§111', '§521', '§521', '§342', '§342', '§362', '§ 301', '§362', '§362']

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Chapter 7 QuestionsQuick Page Index1 Chapter 7 Questions1.0.1 Before Chapter 7 Bankruptcy is Filed: 1.0.2 What is a Chapter 7, Plus Information about the means Test and Exempt Property1.0.3 Confusing – you betcha! Moral – Use an Experienced Bankruptcy Attorney1.0.4 During Bankruptcy:1.0.5 After Bankruptcy:1.0.6 More Information about Bankruptcy:1.0.7 Follow the Steps
Before Chapter 7 Bankruptcy is Filed: (just click on the question and the answer will appear)
What is a Chapter 7 Bankruptcy? A chapter 7 bankruptcy is a proceeding under the federal law where a person is released (discharged) from paying his or her debts by filing bankruptcy, the person keeps those assets that are exempt, they continue to pay on secured items they want to keep (house, car) and turn over all of their non-exempt assets over to the trustee-in-bankruptcy. Some types of debts, however, are not affected by bankruptcy. See 11. USC Section 523.
What is the role of an attorney in a Chapter 7 Consumer Bankruptcy Case? Many people ask me if they “can file their own bankruptcy”. I always answer “Yes, anyone has the legal right to do their own open heart surgery, so why not not their own bankruptcy!” (Thank you Judge Baum for the quote.) The laws were complicated before they changed in 2005, now I believe that only a fool would file their own bankruptcy, no matter “how simple”. In fact, after the law changed many lawyers stopped doing any bankruptcy law because it had become so complex. Never listen to the advise of someone who filed their own bankruptcy. They had a “fool for a client” and probably committed at least one federal crime, but did not get caught. The new laws are being aggressively enforced and the Attorney General’s Office is actively pursuing bankruptcy fraud. Do not use those who advertise on TV – you will end up paying their advertising costs. Also, do not use “legal document preparers”. These are folks who want to be attorneys, but decided not to go to school. Instead, they pretend to know the law, or, worse yet, are disbarred attorneys or other scum who prey off the innocent who do not know better. Always check out your lawyer with their state bar. Ask for references from the lawyer. Most people find good lawyers by asking friends or relatives for referrals.
At a minimum the debtor’s attorney should do the following things in a chapter 7 Consumer Case: • First and foremost – make certain that the debtor understands that importance of the bankruptcy process. That is absolutely necessary that they fully disclosure all assets and debts. This education takes several hours and most must be done by an attorney, not an assistant to that attorney.
How much does it Cost to file a Chapter 7 Bankruptcy? The Court’s filing fee are set by the court and will change with time. The fee is the same whether you are filing bankruptcy individually or jointly with your spouse. In addition to the court filing fee there are also two classes each individual must take. The cost for the two classes depends on the provider. We will provide you with a contact for a relatively low cost first class. Our office will assist you in making arrangement for both classes. More information on these classes.
What classes are required before and after filing a bankruptcy? Every consumer who files Chapter 7 or 13 bankruptcy is required take a credit counseling “briefing” within 180 days PRIOR to filing their bankruptcy and file a certificate of compliance. There is a provision for emergency situations, but they still must prove that they tried to obtain the class within the last 5 days of filing, but they must take the class and file a certificate of compliance within 30 days after filing their bankruptcy Petition. There is also a budget class that must be taken within 45 day s after filing your bankruptcy. Failure to do so will result in additional fees and costs in order to get your discharge in your bankruptcy. There will be fees charged for those classes, unless you cannot afford to pay such fees. Ms. Drain will explain the process.
What is the Mean’s test? The “Mean’s Test” is a formula that determines whether the person filing for bankruptcy protection has enough income to pay the expenses that are allowed, plus extra money to pay to non-priority, unsecured creditors such as credit cards. The Debtor must calculate their “current monthly income”, including all income from spouses, rents (minus expenses), bonuses, plus “help” Debtor has been receiving from family or friends. Allowed living expenses and payment of secured and priority debts are subtracted from the total income for a net income or monthly disposable income that could be used to pay unsecured non-priority debts. The chapter 7 can be challenged if the net income, multiplied by 60, is greater than (1) either 25% of the nonpriority unsecured claims or $6,000, or (2) greater than $10,000. The Debtor may be required to convert the case to a chapter 13 or lose the bankruptcy protection completely. §707(b). Basically, if the debtor can pay $100 per month to their unsecured creditors, then they may face a challenge to their chapter 7. Only time will tell what the law really means.
Will I lose all of my property if I file bankruptcy? No, you will be able to protect your exempt property. Under the laws of the state where you live, and under the federal laws, certain properties are declared to be exempt, and out of the reach of your general creditors. That list of exemptions is unique to the state where you file bankruptcy and how long you lived in that state. If you have property not on the exemption list then you will have to turn it over to the Trustee. Warning – all your property, including exempt property, can be sold to pay back child support or alimony/maintenance. On the main menu above is a link to a list of the properties that are exempt under Arizona law. Be aware that the 2005 Bankruptcy Reform Act dramatically changed law governing exemptions. The new law requires that you must reside in Arizona for the last 2 years in order to use Arizona exemptions. Otherwise, you will have to use the state that you lived in for the six months prior to the last 2 years prior to filing a bankruptcy.
What happens if I have things that are important to me ``assets``? If your case involves assets, the bankruptcy Trustee will immediately begin to collect all of your property to which he is entitled by law, this would the items that are not on the exemptions list or that you do not own. You are obligated to protect those assets until the Trustee can make arrangements to pick them up. After the auction of the items, your creditors will be notified by the Trustee to file a proof of claim; usually within six months after the Meeting of Creditors. The Trustee will examine the proof of claims and object to those the Trustee deems to be improper. All claims not objected to by the Trustee, you, or another creditor will be approved by the court and the creditors will receive a pro-rata share of whatever the Trustee has collected. The fees for the auctioneer, trustee and their attorney are paid out of the funds they collected, not by the Debtor.
Is there a way that I can minimize the amount of non-exempt assets that I will have to turn over to the bankruptcy trustee? This is a very difficult situation, especially if you paid money or transferred assets within 3 – 24 months before bankruptcy. Discuss this with your bankruptcy attorney before you pay money or transfer any assets since not all such transactions are permitted under the Bankruptcy law, but may be permitted under your state law. The 2005 Bankruptcy Reform Act has added several very complicated hoops to planning for a bankruptcy. Paying down mortgages within the last 10 years, buying or transferring assets in the last 2 years or more, paying friends or relatives money in the past 12 months may all be doorways for the Trustee and your creditors to attach your assets. Given the current status of the new law – never plan for your bankruptcy without seeking assistance from an experienced bankruptcy lawyer. By “experienced” I mean someone who practices only bankruptcy law, is in good standing with the State Bar, and has a great reputation in the Bankruptcy Court.
Must my employer be told I am filing bankruptcy? The bankruptcy Trustee will request that you provide copies of several documents (tax returns, bank statements, etc). One of these items will be copies of some of your pay stubs before filing. If you refuse to provide this information then the Trustee may send a form to your employer seeking information about your wages. Therefore, your employer will usually not be contacted so long as you comply with the Trustee’s request.
How does filing bankruptcy affect my credit rating? The filing of a bankruptcy generally means that your credit rating will be 480. Given your situation, it may not take long after your discharge to substantially raise that rating. Several financial institutions openly solicit business from recent debtors, apparently because they know that the debtor cannot file another chapter 7 for at least eight years (six under the pre-10/2005 law). If there are compelling reasons for filing bankruptcy that were not within your control, such as an injury or illness, the creditor may take that into consideration in rating your credit after bankruptcy.
Do I lose any of my rights, such as the right to vote, by filing bankruptcy? No. Bankruptcy is a civil, not a criminal proceeding. You do not forfeit any of your civil or constitutional rights by filing a bankruptcy. Also, neither a utility, a governmental unit, nor your employer may discriminate against you because you have filed bankruptcy. But, if you discharge a utility bill then you may find that you are charged a very large “deposit” when you apply for new utility service.
During Bankruptcy:(just click on the question and the answer will appear)
What are the Debtor’s Duties? The Debtor may not submit any documents to the Bankruptcy Court until the Debtor is certain that the information is (1) well grounded in fact; and (2) warranted by existing law or a good faith argument for the modification of the existing law. Rule 9011 In other words, someone who is representing himself or herself in a bankruptcy is held to know both the bankruptcy and state laws that apply to their situation. Ignorance of the law is no excuse. The Debtor’s attorney must make the same avow regarding the information provided by the Debtor. Sanctions can be awarded under §707(b)(4).§521 describes the documents that must be filed, the 60 day deadline for filing the pay advices, the filing of the Mean’s Test (Official Form B22A), deadline for filing statement of intention and performing same (§§111, 521(a)(2) & (a)(6), but see stay relief problem §362(h)), appear at the required creditor’s meeting, complete the required credit briefing class (before filing the bankruptcy §109(h)) and budget class (after filing the bankruptcy §§111, 727(a)(11)). 7 days before the creditor’s meeting deliver to the Trustee a copy of the last tax return filed or a transcript, provide the Trustee with proof of identity and other documents (bank statements, wage statements, tax returns, car titles, etc). Click here for the timeline. Failure to comply with these deadlines will most likely result in the dismissal of the bankruptcy case. (§521(i)(1).All creditors must receive notice of the bankruptcy (§521(a)(1)(A). This notice requirement includes all addresses on all mail received in the last 90 days prior to filing. §342(c) Failure to provide notice to the correct address may mean the creditor can continue legal actions outside the bankruptcy court, until they receive notice at the correct address. The §342 requirement is new law and may be open for interpretation for many years.
What is the Automatic Stay? The filing of the petition creates an automatic stay under 11 U.S.C. §362 prohibiting all collection actions. 11 U.S.C. §§ 301, 302, 101(42) – unless the Debtor has filed a prior bankruptcy in the last 12 months. The automatic stay is good for only 30 days if that Debtor has filed one prior case in last 12 months. §362(c)(3)(A). If the Debtor wants to extend the automatic stay they must file a motion to extend the Stay immediately after filing the bankruptcy. There is no automatic stay if the Debtor has filed 2 or more cases in last 12 months. §362(c)(4)(A)(i) A dismissed case is a filed case. There is no excuse for a Debtor’s failure to understand these limitations.
How will the court contact me and what should I do about Court orders or instructions? The orders or instructions will be mailed to you, unless you sign up for e-mail notification. You should contact your attorney as soon as you receive the orders to obtain advice on how to properly follow the orders. It is very important, therefore, that you always keep the court and your attorney informed of your correct address.
What happens to the property that I turn over to the Trustee? A public auction is held and your property is is converted into cash, which is then distributed to those of your creditors who file claims (Proof of Claim) against your bankruptcy estate. You, your family and friends have a right to bid at this auction. The expenses of administering your estate will also be paid from these funds. The Trustee assigned to your case will be responsible for paying his/her attorney or other professional.
What will happen if there is no money or property to turn over to the bankruptcy Trustee in my Case? If you have no money or property of a value in excess of the exemptions allowed by law, your case will be considered a “no-asset” case. Soon after the Meeting of Creditors the Trustee/court will decide whether or not your case is a no-asset case. Normally, your discharge will be entered approximately 120 days after your case was originally filed, unless a creditor files an objection to your discharge, the Trustee request an extension of time or you ask for more time in which to reaffirm debts. Your case will probably be closed shortly after the discharge.
What about my tax refund check? Any right that you had to a tax refund at the time of filing the bankruptcy is an asset of your bankruptcy estate and belongs to your trustee. At the time that you get your tax refund check, you must turn that check over to the trustee. If the amount is small it is possible that you may get back the check back. However, you should anticipate that the trustee will take a portion of the refund equal to the amount due to you on the date of filing.
What is a Reaffirmation Agreement? To reaffirm a debt is to sign a new contract with the lender, thereby reaffirming the Debtor’s personal liability for the obligation. This is typically done with vehicles. The Debtor should always talk to their attorney before reaffirming any personal liability for a debt. There may be other options to reaffirming, such as surrender, redeem, or avoidance of the lien. If, after considering the options a debtor voluntarily decides to reaffirm and re-establish their personal liability to a creditor, and enters into a written agreement to that effect signed by the debtor and the creditor, the Debtor must then submit the agreement to be approved by the Court. Even once the reaffirmation agreement is signed the Debtor has 60 days to revoke it. The consequence of a debtor’s failure to take advantage of other options, other than reaffirming the debt, is that the debtor is bound by the terms of the new agreement and can be sued if there is a default.
So why would you gladly sign a reaffirmation agreement? Perhaps, in the situation where the creditor is offering better terms on a new contract; such as a reduction in the principal equal to the current fair market value of the vehicle and reduction of the interest rate. Nothing stops the Debtor from negotiating these new terms as part of any reaffirmation agreement.
What is a Discharge in Bankruptcy? A discharge is the court’s order stating that you do not have to pay your debts to the creditors that were listed in your bankruptcy documents, so long as the court did not entered a non-dischargeability order. Other debts that are not discharged under the current laws include student loans, child support, alimony/maintenance, government fines or penalties, most taxes and a few others.
How will I receive my discharge in bankruptcy? Usually by mail, unless you have asked for electronic notification. In some states there may be a court hearing, which you must attend, where the court will explain the meaning of the discharge, or the reasons for denying your discharge, if it is not granted. Arizona does not have this discharge hearing, unless yours is a very unique situation.
What debts are not discharged in bankruptcy? If your discharge in bankruptcy is granted, in most circumstances all of your debts will be discharged except the following list, which is intended to be only an outline of most debts that are not discharged.
Can my utility company refuse to serve me if I discharge their bill? If, immediately after filing the bankruptcy the Debtor provides their utility company with a deposit or other security to insure the payment of future services, the utility may not stop service, refuse to serve, or discriminate against the Debtor for discharging their bill. But, if the Debtor discharges a utility bill do not be surprised that there is a very large deposit required whenever a new service is requested.
Are my out-of-state debts discharged in bankruptcy? Yes. Bankruptcy is a federal proceeding and the bankruptcy court has the jurisdiction and power to discharge debts contracted anywhere in the Country, whether in or out of your state of residence.
After Bankruptcy:(just click on the question and the answer will appear)
What should I do if I move or change my address? Contact your attorney immediately about a change of address or phone number for a year after you receive you discharge. Also, make sure the Court and the Trustee are informed of your new address.
Can I continue to pay some of my debts after I file bankruptcy? Yes, you can pay as many of your debts as you want or need to pay after you file bankruptcy. Certainly, if you want to keep your house and car you must continue paying the lender. You are also obligated to pay the debts that for which you enter into a Reaffirmation Agreement. (See discussion above on reaffirmation agreements). I recommend that you not make any payments that are not absolutely necessary. Do not take on any new credit for at least one year after bankruptcy. My clients tell me they have more money than they ever thought, once they were relieved of the obligation to pay the high interest rates for their credit cards and other unsecured debts.
What should I do if I am sued after bankruptcy on a debt that was discharged? First make sure the debt was listed in your bankruptcy. If it was not you may still have the time to add it. As to the lawsuit – do not ignore it, otherwise a default judgment will be entered against you. Respond to the law suit by filing an answer in the court where you have been sued, stating that the debt has been discharged in bankruptcy. In most instances the case will be dismissed once the judge learns the debt was listed in the bankruptcy and subsequently discharged. If the judge does not dismiss the case, then you can apply to the bankruptcy court for an injunction ordering the creditor to stop the suit against you. A discharge in bankruptcy is a valid legal defense against any debt that has been properly discharged, but it is a defense that you must raise.