Bankruptcy today is much different than it was just a few years ago. There are many new considerations, and financial strain in our country has made economic hardship a realty for many people across the nation. If you need bankruptcy counsel, please contact us at Hammond Law Firm PLLC where we have attorneys specializing in Chapter 7 and Chapter 13 bankruptcy. Both of these bankruptcies provide debtors with financial relief and a fresh start by obtaining a discharge from debts and certain financial obligations.
We know that this time is very stressful for you as you contemplate bankruptcy. The Hammond Law Firm PLLC is here to help you, starting with a free consultation. Please contact us directly by phone or form fill, our attorneys are here to answer your questions at any time. We look forward to hearing from you and ensuring you gain a foothold in financial freedom.
A chapter 7 bankruptcy case is known as a liquidation. A bankruptcy trustee gathers and sells the debtor’s nonexempt assets and uses the proceeds of such assets to pay creditors. This does not mean you lose everything. You are allowed to keep certain dollar amounts in property and these are known as exemptions. Part of the debtor’s property may be subject to liens and mortgages that pledge the property to other creditors which the Trustee cannot take as long as the creditor properly secured their interest in the property. Debtors should realize that the filing of a petition under chapter 7 may result in the loss of nonexempt property.
To qualify for relief under chapter 7 of the Bankruptcy Code, the debtor may be an individual, a partnership, or a corporation or other business entity. There is no dollar amount in debt you have to be in order to qualify. You qualify based on income and ability to repay debts or inability to repay debts. In addition, in order to qualify for Bankruptcy within 180 days before filing a debtor must have completed credit counseling.
The primary purpose of bankruptcy is to “discharge” certain debts. This discharge gives the debtor a “fresh start” and allows them to begin rebuilding their credit. The right to a discharge is not absolute, and some types of debts are not discharged such as student loans, alimony and child support, taxes and debts arising out of fraudulent activity. A discharge does not get rid of a secured claim/lien.
A chapter 7 case begins with the debtor filing a petition, schedules, statement of financial affairs and means test with the bankruptcy court. Debtors must also provide the trustee with a copy of the tax returns for the most recent tax year evidence of income.
The courts charge a $335.00 filing fee. The filing of a petition under chapter 7 “automatically stays” (stops) most collection actions against the debtor or the debtor’s property. 11 U.S.C. §§ 362.
Between 20 and 40 days after the petition is filed, the case trustee (described below) will hold a meeting of creditors. During this meeting, the trustee puts the debtor under oath, and both the trustee and creditors may ask questions. The debtor must attend and answer questions regarding the debtor’s financial affairs and property. It is important for the debtor to cooperate with the trustee and to provide any financial records or documents that the trustee requests.
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 non-exempt property if it is free and clear of liens.
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. The bankruptcy court will issue a discharge order 60 to 90 days after the date first set for the meeting of creditors.
The Court may deny an individual debtor a discharge if it finds the debtor committed perjury; failed to obey a lawful order of the bankruptcy court; fraudulently transferred, concealed, or destroyed property, etc.
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 which puts that debt “outside” of the bankruptcy.
Chapter 13 Bankruptcy is also known as a reorganization bankruptcy. Chapter 13 bankruptcy is filed by individuals who want to pay off their debts over a period of three to five years. In many cases, the amount of debt is greatly reduced. This type of bankruptcy appeals to individuals who have non-exempt property that they want to keep. It is also an option for individuals who have predictable income and whose income is sufficient to pay their reasonable expenses with some amount left over to pay off their debts.
Chapter 13 may allow you to strip a wholly unsecured mortgage. Further, a chapter 13 can STOP a FORECLOSURE if it is filed before the Sheriff’s sale. It is a very useful tool – providing protection from creditors, garnishments, seizures and the like while you reorganize your financial affairs.