Chapter 7
A Chapter 7 bankruptcy is often referred to as “liquidation.” Under this Chapter, the debtor’s nonexempt assets (those not protected by law) are sold and the proceeds are distributed to creditors. However, in the majority of Chapter 7 petitions the debtor’s unsecured creditors receive no payment because the assets of the debtor are usually fully secured (based on a lien), exempt (law allows the individual to keep), or insufficient to pay anything but a fee to the Chapter 7 trustee. Such petitions are generally known as “no asset” cases. For individual and joint consumer debtors, the Bankruptcy Code imposes a “means test” that evaluates whether those filing for bankruptcy have the ability to pay creditors over a five-year period, as provided for in other bankruptcy chapters. Barring other rules, if the petitioner(s) does not qualify under Chapter 7, the other chapters are still available. All Chapter 7 cases involve a Chapter 7 trustee. The Chapter 7 trustee is to liquidate the petitioner’s nonexempt assets and distribute the proceeds to creditors. Once a successful case is completed, the petitioner receives relief from all dischargeable debts. In the majority of Chapter 7 consumer cases, the debtor is able to discharge all unsecured debts, with no further payments being required to creditors. Chapter 7 cases are generally completed within three (3) months of filing. The process starts with completing a credit counseling course (usually takes about ½ hour online). The individual, couple, or business filing for the bankruptcy then attends one meeting of creditors with a court-appointed trustee. This meeting is generally very quick, and covers the items disclosed in the bankruptcy documents filed with the court. The final step is to complete a second debtor education course (again, generally online). Chapter 7 bankruptcy cases at the Pacific Legal Group Office start at the lowest rates in the industry.
Filing of a bankruptcy case can be very emotionally difficult. There are many rules and procedures that have to be followed in order to eliminate the debts that the person filing for bankruptcy wants to have eliminated through a Chapter 7 Bankruptcy. The first key step is that each person that wishes to file for bankruptcy must complete a Credit Counseling course. There are many options for this course, including online options. However, this course must be completed before the filing of the bankruptcy. The certificate showing that the individual has completed the course must also be filed with the court.
After all the papers (usually at least 50 pages) are filed with the Bankruptcy Court, approximately thirty (30) days later the individual, now known as the debtor, meets with a court-appointed Trustee. This Trustee reviews the paperwork submitted and looks to see if there are any assets available to creditors. If there are none, the Trustee lets the Bankruptcy Court know that there are no such assets, and the case proceeds further to discharge. If there are assets that are available, the trustee will require a turnover of such assets.
From the time the Bankruptcy case is filed, and before it is closed, the debtor (individual who filed the case) must complete another course. This course is call a Debtor Education class. Another certificate must be filed with the Bankruptcy Court. Again, this course is generally done online.
After about three (3) months from the initial filing, the Chapter 7 case will be complete with the debtor receiving a discharge of all dischargeable debts. Some debts are not eliminated through the bankruptcy process (some taxes, domestic support claims, student loans, and others).
Should you have additional questions on Chapter 7 Bankruptcy, please contact the Pacific legal Group.
