Chapter 7 Bankruptcy

When a creditor files suit and obtains a judgment against an individual, that creditor has the right to collect the debt by executing or attaching on the debtor's assets. Common forms of judgment execution are wage garnishment, bank account garnishment, levies on personal property, and liens. Under the laws of the states of Missouri and Kansas, certain property may be exempt from execution. If property is exempt from execution, the judgment creditor is not allowed to seize, attach, or in any way interfere with the rights of the debtor to that exempt property. Those exemptions also apply in bankruptcy. Pursuant to the U.S. Bankruptcy Code, U.S. Bankruptcy Courts must choose whether to use the exemptions allowed under federal statute or elect to use the exemptions allowed by the state where the U.S. Bankruptcy Court sits. Both Missouri and Kansas have "opted out" of the federal exemption statutes and therefore use the exemptions allowed under state law.

Chapter 7 Description:
Chapter 7 bankruptcy is commonly referred to as a Chapter 7 liquidation because any unencumbered property or property with non-exempt equity is sold or "liquidated" by the Chapter 7 trustee for distribution to the debtor's unsecured creditors. Chapter 7 bankruptcy allows a debtor to have his or her unsecured debts discharged if the debtor meets certain requirements. However, some debts are normally not dischargeable, such as tax debt, support obligations, and guaranteed student loans. You should contact an attorney to discuss what debts are dischargeable in bankruptcy and which debts are not. Other than those debts reaffirmed by the debtor or those debts found by the bankruptcy court to be non-dischargeable, the Chapter 7 debtor will receive a discharge of all personal liability for those debts.

Chapter 7 Trustee:
The Chapter 7 trustee is appointed by the Office of United States Trustee. The Chapter 7 trustee's duty is to make sure that the debtor is complying with the rules of the bankruptcy court and to determine whether any non-exempt assets exist that could be taken by the trustee, sold, and used to pay the debtor's creditors.

Chapter 7 Requirements
In order to qualify for relief under Chapter 7 of the U.S. Bankruptcy Code, the debtor must have little or no disposable income. Disposable income is defined as a person's net income minus his or her reasonable and necessary expenses. Typical expenses considered to be reasonable and necessary are the debtor's expense for housing, such as rent or house payments; car payments; expenses for food; utilities; insurance; and transportation expenses. If it appears that the debtor has little or no disposable income, then the debtor may proceed pursuant to Chapter 7 of the bankruptcy code.

Reaffirmation of Debts:
In a Chapter 7 case, debtors may want to "reaffirm" certain debts. To reaffirm a debt normally means that the debtor intends to pay a specific debt back to a creditor under the terms of the original agreement. This is typically done on secured debts such as home mortgages and automobile loans where the debtor wants to retain that piece of secured property. These debts are normally not modified and reaffirmation of the debt will cause the debt to survive bankruptcy and the reaffirmed debt will not be discharged upon the completion of the Chapter 7 case. A debtor is not required to reaffirm any debt in the bankruptcy, however, if the debtor does not reaffirm a debt secured by a piece of property, the property securing the debt must be surrendered to the creditor pursuant to the security agreement with the creditor.

Stopping Collection: The Automatic Stay
Once the Chapter 7 debtor files his or her case with the bankruptcy court, what is known as the automatic stay goes into effect. The automatic stay prohibits any creditor from taking any action outside the bankruptcy court to collect any debt. Therefore, creditors may no longer send letters or statements, make telephone calls, proceed with lawsuits, repossess vehicles, or garnish or attach on any assets of the debtor once the automatic stay goes into effect. The automatic stay goes into effect immediately upon filing of the debtor's bankruptcy petition The automatic stay will remain in effect until the close of the bankruptcy case unless a creditor files a motion with the court to lift the stay and is able to show good cause to have the stay lifted.

Section 341 Meeting of Creditors:
Approximately 30 days after the Chapter 7 case is filed, what is known as the Section 341 meeting of creditors is held, presided over by the Chapter 7 bankruptcy trustee. The Chapter 7 bankruptcy trustee is appointed by the office of the U.S. Trustee for the district in which the debtor filed his or her Chapter 7 bankruptcy. The Chapter 7 trustee will conduct the 341 meeting of creditors. At that time, the individual debtors will be placed under oath and questioned regarding their income, assets, and debts. Any creditor wishing to ask specific questions of the debtor also has the right to appear and inquire of the debtor. If there are no objections to discharge by the trustee or creditors, the Chapter 7 debtor will normally be granted a discharge approximately 60 days after the conclusion of the Section 341 meeting of creditors.

Distribution to Creditors:
In the majority of Chapter 7 cases there are no assets available for what are sometimes known as no asset cases. In no asset Chapter 7 cases, the trustee has determined, based upon the value of the debtor's assets and the exemptions claimed under the applicable state law, that there are no non-exempt assets that can be taken by the trustee and sold to distribute to the debtor's creditors. In Chapter 7 cases where non-exempt assets exist, the trustee must either seize those assets, and sell them, or require the debtor to pay the value of those assets to the trustee. The proceeds will then be distributed to the debtor's creditors on a pro rata basis.

Duration of the Chapter 7 Process:
Clients of Barlow & Niffen, PC, will normally make an appointment and come in to meet with an attorney within a few days of the initial phone call. Our office will normally mail the prospective client a letter confirming the date and time of the appointment, with a list of information the prospective client should bring to the appointment. However, in emergency situations, our office will make every effort to schedule an immediate appointment. After the initial meeting, your petition and schedules will normally be ready for filing within 10 days to two weeks. In situations where a garnishment, or foreclosure is pending or imminent, preparation and filing will be expedited to meet the client's needs. Filing the Chapter 7 case causes the automatic stay to take effect, stopping debt collection. Approximately, 30 days after filing, the 341 meeting of creditors will be held presided over by the Chapter 7 trustee. Most case conclude, absent objections to discharge, with the Court granting a discharge order approximately 60 days after the 341 meeting.

Please note:
Barlow and Niffen, P.C. is a debt relief agency as defined by the bankruptcy code. Barlow and Niffen, P.C. helps people file for relief under the bankruptcy code.

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