Chapter 7 Bankruptcy
SHOULD I FILE BANKRUPTCY?
Whether or not you should file bankruptcy depends on your particular circumstances. It may be that after a consultation with our firm we advise you to resolve your financial difficulties through other means. In some cases, declaring bankruptcy may be necessary. The decision to file for bankruptcy is a serious one.
HOW LONG WILL MY BANKRUPTCY SHOW ON MY CREDIT REPORT?
The Fair Credit Reporting Act, 6 U.S.C. Section 605, is the law that controls credit reporting. The law states that credit reporting agencies may not report a bankruptcy case on a person’s credit report after ten years from the date the bankruptcy case is filed. Other bad credit information is removed after seven years. The larger credit reporting agencies belong to an organization called the Associated Credit Bureaus. The policy of the Associated Credit Bureau is to remove Chapter 11 and Chapter 13 cases from the credit report after seven years to encourage debtors to file under these chapters. The bankruptcy court has no influence over these reporting policies.
WHAT IS THE DIFFERENCE BETWEEN CHAPTER 7, 11 & 13 CASES?
Chapter 7 – Liquidation: This chapter of the U.S. Bankruptcy Code provides for an orderly court-supervised means of selling certain assets to pay your creditors. In a Chapter 7 case, a trustee is appointed to take charge of your “estate” consisting of all your assets. The law may allow you to keep some of your property. The trustee will sell the rest to pay your creditors. Unless someone objects, some or all of your debts will be discharged within a few months after the bankruptcy petition is filed.
Chapter 11 – Reorganization: This Chapter of the U.S. Bankruptcy Code is available to individuals, businesses and other entities, but is primarily intended to allow an ongoing business to restructure its debts. Successful reorganization is dependent on the debtor filing what is called a “reorganization plan” and obtaining the acceptance of creditors and approval by the court for such a plan.
Chapter 13 – Adjustment of Debts for an Individual with Regular Income: This Chapter of the U.S. Bankruptcy Code provides a court-supervised method for a debtor to pay back creditors over a period of time of up to five years. The debtor files a plan for repayment with the bankruptcy petition or soon thereafter. Payments must begin within thirty days after the case has begun. The payments are made to a trustee who will begin paying the creditors after the plan has been approved by the court.
WHEN AM I UNDER BANKRUPTCY PROTECTION?
You are under bankruptcy protection when and after your petition is filed and a case number is assigned. The moment a petition has been filed, there exists an automatic stay, or suspension, of virtually all litigation and other action by creditors against the debtor or the debtor’s property. In other words, once a petition has been filed, creditors cannot commence or continue most legal actions, such as foreclosure of liens, execution on judgments, trials, (garnishments), or any action to repossess property in the hands of the debtor. Creditors can, however, seek to have the court allow them to pursue or continue legal collection actions, but must show cause for doing so.
WILL FILING BANKRUPTCY STOP MY WAGES FROM BEING GARNISHED?
Yes, once you file bankruptcy, you are under protection of the court from most creditors. If you provide our office the correct contact information, we will immediately notify the garnishing creditor and/or sheriff that you have filed a bankruptcy petition. This will stop garnishments immediately.
WHAT IS A MEETING OF CREDITORS? DO I HAVE TO ATTEND?
The first meeting of creditors is required under Section 341 of the Bankruptcy Code and you are required to attend. However, don’t be nervous. Even though you will be under oath, the hearing is fairly informal and is conducted by a bankruptcy Trustee, who is usually an attorney or a CPA. The hearing takes place in an office-like room. There is no judge, jury and often no creditor’s. So, please, relax. One of our firm’s attorneys will be with you at the hearing and we will prepare prior to the trustee interview. The entire hearing generally lasts less than five minutes.
The purpose of the meeting is to enable the appointed trustee to examine you under oath regarding the information that has been filed with the Court. The trustee or a creditor may inquire about your financial status, conduct and financial affairs, and any other matters that are relevant to the administration of your estate. If a creditor wishes to do an in-depth examination, he or she will request a Rule 2004 examination from the Court. Failure to attend this meeting may result in dismissal of your bankruptcy case.
WHAT IS A TRUSTEE?
A trustee is a person who works with the court to administer bankruptcy cases. The trustee does not represent the debtor (you) or any individual creditor and cannot give legal advice. Rather, the trustee has independent rights and duties that are set forth in the Bankruptcy Code sections 323, 327, 341, 343, 345, 363, 364, 365, 704 (chapter 7 cases) and 1302 (chapter 13 cases). In a chapter 7 case, the trustee may take possession of your assets, sell them, and distribute the proceeds to creditors. In a Chapter 13 case, the trustee administers your plan of payment, collects the funds, and pays the creditors. The trustee will also oversee the first meeting of creditors.
ARE ALL OF MY DEBTS CANCELLED BY THE BANKRUPTCY COURT?
No, certain debts are not canceled (discharged) by the US Bankruptcy Court. Examples include taxes, school loans, any debts resulting from fraud, alimony and child support payments. Other debts are canceled only if your petition is approved by the US Bankruptcy Court. Specific questions you have should be directed to our office.
WHEN WILL I GET MY DISCHARGE?
Individual debtors are eligible to receive their Chapter 7 discharge 60 days from the date set for the 341 meeting, unless a creditor objects in a timely manner or the court orders otherwise. In the normal case where no complaint objecting to the discharge is filed, the debtor will receive a discharge within five working days after the 60 days has passed. If a notice of amendment to schedules is filed to add creditors, the discharge will be delayed an additional 30 days from the date of filing the notice.
WILL ALL OF MY CREDITORS BE NOTIFIED OF MY DISCHARGE?
All creditors who were listed on your mailing matrix or who entered an appearance in your case will be notified. If you have omitted a credit, you must immediately advise our office. Under the BAPCPA, omitted creditors may not be subject to the discharge, so it is imperative you list all of you debts in your Bankruptcy. If our office must list additional creditors once your case has been filed you will incur additional fees. So make sure all your creditors are listed in your Bankruptcy prior to filing. Our firm will provide all clients with a three-source credit report. However, you must carefully review your credit report to ensure all your debts our listed.
WHEN WILL MY CASE BE CLOSED?
Since all cases bear unique circumstances, it is difficult to pinpoint an exact time that your case will be closed. Many Chapter 7 no asset cases are closed within 90 days from filing if no disputes have arisen. Chapter 7 asset cases require that the trustee liquidate the assets, which often takes several years. Chapter 13 cases remain open as long as the plan payments are being made, generally for three to five years after the plan has been confirmed. Chapter 11 reorganization cases are more complicated and may remain open longer than three years even if a plan has been confirmed. Accordingly, if the Chapter 7 trustee has intercepted your tax return, he will keep your case open to disburse funds. If you are entitled to any remaining funds the Trustee will provide those funds to you after disbursement. This may take several months.
HOW DO I GET A COPY OF MY DISCHARGE?
You will receive a copy of your discharge in the mail after it is entered. However, if over 60-90 days have passed and you have not received your discharge or you need another copy please call the Bankruptcy Clerk’s Office (702-903-1254).
WILL I BE ABLE TO KEEP MY HOME OR CAR IF I FILE BANKRUPTCY?
As long as your equity in the property is fully exempt, you will not lose your home or car during your bankruptcy. You may still be able to keep your property even if your property is not fully exempt by filing a Chapter 13 Bankruptcy instead of a Chapter 7 Bankruptcy.
CAN I GET A CREDIT CARD AFTER FILING BANKRUPTCY?
Yes, there are many options available. You might be able to keep the credit card you already have if the credit card company approves. You can also get secured credit card which is secured by your own bank account.
HOW DO I DEAL WITH COLLECTION AFTER I HAVE FILED?
Put case number and mail back
Refer Cr to our office
Document all calls and dates of communications
Create a Log for clients to take with them – include in post filed letter
HOW DO I LIST MY OMITTED CREDITORS IN THE BANKRUPTCY?
You must list all your creditors in the bankruptcy. In order to list and schedule omitted creditors you must provide the following information to our office for each omitted creditor:
Name of Creditor
Complete Address (including zip code)
Explanation how debt was incurred and why you did not provide our office this information prior to filing you bankruptcy
There is a charge to add an omitted creditor and for each additional creditor added after the first. You must provide the correct amount to our office with the above creditor information.
It is imperative that you provide all the above immediately or the omitted debts may not be discharged.
If you have any questions, please contact me at DavidKrieger@hainesandkrieger.com.
WHAT DO I DO IF I RECEIVE NOTICE THAT FORECLOSURE IS STILL CONTINUING OR RESCHEDULED?
Don’t worry. Your Chapter 13 was filed on time, so all action taken by your mortgage company, are stayed post-petition. This includes foreclosure actions. Often, speculators, such as investors, don’t realize that you filed for bankruptcy or don’t know how bankruptcy works. Also, creditors often re-list property foreclosures for a month or two off in the future when you file your bankruptcy. This does not mean you lost your home, so relax. As long as you remain current with your Chapter 13 trustee payments and have timely resumed your mortgage payments starting the month after you bankruptcy is filed you are on the right track.
If you continue to stay current with you Chapter 13 and mortgage payments there will generally be no basis for a creditor to foreclose on your property post-petition. Also, before any foreclosure action can be commenced your mortgage company would have to seek approval from the bankruptcy court to “lift the stay” which is the invisible wall protecting your assets. You would have at least 20 days notice if a credit desires to bring such a motion in the Bankruptcy Court.
Also, unless the Chapter 13 trustee (or a creditor in interest) brings a motion to dismiss your Chapter 13, you will be afforded all the protection under Chapter 13.
Typically, a case will only be dismissed or the stay will only be “vacated” if you are not making your monthly trustee and mortgage payments. So, make your payments and you will not have to worry.
If for some reason a payment is returned, please let our office know immediately. Payments are sometimes returned from your mortgage company because the left hand doesn’t know what the right hand is up to.
For this reason, it is crucial that you maintain close track of all payments send in the first 6-12 months of your Chapter 13. I suggest sending all payments via certified mail.
WHAT HAPPENS IF I GET BEHIND WITH PLAN PAYMENTS?
Do your best to catch up. If you are only slightly behind with your payments it’s not the end of the world. Try and get on track next month.
You should however send some money to the trustee to demonstrate your “good faith” and commitment to your Chapter 13. However, if in the interim you trustee files a motion to dismiss your case for non-payment then you must provide our office with as much as you can afford to catch you up with your payments and propose a modified plan.
Generally, a modified plan may be submitted to the Chapter 13 trustee to cure post-petition delinquencies. However, you will have to provide our office with payment to prepare your modified plan and make an appointment to come in to our office and review your new plan with us.
WHO DO I SEND MORTGAGE/TRUSTEE PAYMENT TO?
Send your regular monthly payment to the “usual” address until you are advised otherwise. If for some reason a payment is returned, please let our office know immediately. Payments are sometimes returned from your mortgage company because the left hand doesn’t know what the right hand is up to.
For this reason, it is crucial that you maintain close track of all payments send in the first 6-12 months of your Chapter 13. I suggest sending all payments via certified mail.
WHEN DO I BEGIN TO PAY THE MORTGAGE OR TRUSTEE?
You must begin to make your Chapter 13 Trustee payments, mortgage payments and any other secured payments being paid outside your bankruptcy (such as car payments, if applicable) the month after you are filed.
WHAT HAPPENS IF I MISSED A PAYMENT TO MORTGAGE/CAR/TRUSTEE?
Do your best to catch up. If you are only slightly behind with your payments its not the end of the world. Try and get on track next month.
However, your mortgage company may file a motion for “relief from the automatic stay”. The “stay” is what protects while you are in bankruptcy; the “Stay” prevents creditors from pursuing or continuing legal action without court permission.
If you mortgage company file a motion for relief from stay you will be noticed and receive a copy of the Motion. You must contact our office immediately and provide us with money to propose to your creditor. These motions can often be resolved through an “adequate protection order” or “APO”. An APO is an agreement between you and your creditor wherein you make certain promises. Usually APO’s will allow you spread your missed or late post-Bankruptcy petition payments out over a period of 4-6 months. However, this is not guaranteed. Generally, your creditor will be entitled to received attorney’s fees and costs for bringing the Motion, but these can usually be included in the APO payments.
However, creditor’s also make mistakes (often), so if you receive a Motion for Relief carefully review it and put together all your proofs of payment to your creditor to ensure you received credit for all payments made. Do this even if you know you are behind with your payments. Creditors often misapply payments.
If you fall behind with your Chapter 13 trustee payments you should make an effort to send some money to the trustee to demonstrate your “good faith” and commitment to your Chapter 13.
However, if in the interim your trustee files a motion to dismiss your case for non-payment then you must provide our office with as much as you can afford to catch you up with your payments and propose a modified plan.
Generally, a modified plan may be submitted to the Chapter 13 trustee to cure post-petition delinquencies. However, you will have to provide our office with $350 to prepare your modified plan and make an appointment to come in to our office and review your new play with us.
CAN I REFINANCE/SELL MY HOME/PURCHASE CARS?
Yes, but you must obtain Court permission to do so. So, please provide our office with a “good faith estimate” also called a tentative “Settlement Statement” for selling/ refinancing your home, we will prepare a motion on your behalf.
Our office will also need the name, address and phone number for your real estate agent, buyer and/or refinance agent. In some cases you must also provide our office with an appraisal, but I will advise you if this is necessary.
WHAT HAPPENS TO MY TAX REFUND?
While you are in bankruptcy your tax refunds are property of the estate and the trustee is entitled to intercept your refund and distribute your refund to unsecured creditors. However, if you need your refund or have an unanticipated expense our office may be able to file a motion on your behalf permitting you to retain your refund. You will usually be able to keep your refund, but this often requires you to provide an equal sum be paid to your unsecured creditors while you are in a Chapter 13.
HOW DO I OBTAIN A NEW 341 HEARING?
You must attend your meeting of Creditors. However, if you truly cannot make the scheduled date, you must advise my office of the reason(s) you cannot attend and provide proof of the reason you can’t attend which we will provide to the Trustee. There is still no guarantee that the trustee will provide you a continued date but we will make the request. Please also be aware that you must provide our office with payment prior to the continued hearing date for our additional appearance. Accordingly, it is in your best interests to attend the initial hearing unless there is a serious emergency.
WHAT DO I DO IF TRUSTEE FILED AN OPPOSITION/MOTION TO DISMISS?
The trustee files Oppositions to Confirmation and Request to Dismiss Chapter 13 in almost every Chapter 13 case after the 341(a) Meeting of Creditors. You probably noticed at your hearing that the Trustee was writing things down on a sheet of paper. Well, that sheet was the Opposition and Motion to Dismiss. Most of the issues our office resolves prior to your Confirmation hearing. Again, you do not need to attend your Confirmation hearing unless we specifically call you and tell you to attend. However, you may notice some items on the Trustee’s Opposition to Confirmation relating to documents or items requested by the Trustee during your 341(a) hearing. These items must be provided to my office immediately, or you case may actually be dismissed. So, for example, if your tax returns have not been filed and the trustee requested your tax returns, you must provide these to my office prior to your confirmation hearing. You should have already received a letter from our office indicating which documents the trustee needs which you have not provided. Please review this letter and provide the requested documents. Our firm will take care of the majority of other objections to Confirmation.
WHAT DO I NEED TO BRING WITH ME TO THE 341?
Any documents previously requested which have not been provided. Generally you must provide our office the following documents for the trustee:
Last 4 years of tax returns
Proof of Social Security and a Current Photo ID
Bank statements for each bank account for the last 6 months including the filing date of your Bankruptcy. So if you Bankruptcy case was filed on June 15, 2006, you would have to provide our office with bank statements from December 15, 2006 through June 15, 2006 for each bank account you control
Proof of Income for the 6 months prior to filing. This includes proof of social security payments, support payments, regular pay stubs, personal injury awards or any other source of income during the 6 months prior to filing. In other words you must provide all proof of the income received from January 1 through June 30 for a case filed in July. This is a requirement of the Court. You must also provide our office proof of your post-petition income.
Copies of Automobile Purchase Contracts (if applicable)
Divorce Decrees (if you divorced within the last 6 years).
Evidence of any Real Estate owned (such as deeds or settlement statements).
Any other documents previously requested but not provided.
To the extent that you have provided the above or the above items are inapplicable, you do not need to provide these items again. If you have any further questions, please contact us.
CAN I CONVERT TO A CHAPTER 7?
It depends. Generally, to the extent you are paying down IRS Taxes or mortgage arrears, its not in your best interest to convert to a Chapter 7 until these obligations are paid through the Chapter 13 (especially if you want to keep your home). However, once these items are paid down it may be in your interest to convert to a Chapter 7. Be advised however that the case law under the Bankruptcy Abuse Prevention and Consumer Protection Act enacted, October17, 2005 (BAPCPA) is still young. Our best advice is that if you are in a Chapter 13 you may wish to remain in the Chapter 13 until the case law develops. By converting to Chapter 7 you may risk losing the valuable benefits you receive through a Chapter 13 discharge. More importantly, you may be required to reaffirm obligations in a Chapter 7 where a Chapter 13 would not require reaffirmation of certain debts. We can of course discuss this further if you have additional questions.
WHEN DO I GET MY DISCHARGE?
In a Chapter 7 the discharge is issued by the Clerk of the Bankruptcy Court 60 days after your 341(a) Meeting of Creditors. You should receive a timely discharge unless the trustee objects to your discharge through a formal motion. Generally this occurs if you fail to comply with the trustee’s requests for documents or turnover of estate property (such as bank accounts and/or tax returns). So, comply with the trustee’s directives and all should be fine. Occasionally the Clerk takes more than 60 days to issue your discharge. Generally, this just means the Clerk has to press a button on his computer to issue your discharge. So please be patient, but follow up with the clerk at 702-903-1254 if you have not received your Chapter 7 discharge after 90 days passes from your 341(a) hearing. Please also be aware that our office has no control over the Bankruptcy Court issuing discharge certificates.
In a Chapter 13 the Clerk will enter a discharge after you have made all Plan payments in accordance with your Chapter 13 plan. This generally takes a few months after your final Chapter 13 payment since the Trustee’s Office performs an accounting and final distribution tasks. Please be patient and understand that our office has no control over issuing your Chapter 13 discharge. However, if your plan is paid in full and you have not received your discharge after 3-4 months, please contact the Clerk’s office at 702-903-1254.
WHAT DO I NEED TO BRING TO MY NEXT APPOINTMENT?
When you retained us we provided you with a “TO BE BROUGHT BACK” list. You must provide our office with any listed documents (to the extent such items are applicable) at least 2 days prior to your next appointment. Failure to provide these items may result in rescheduling your next appointment and an incursion of additional fees. Accordingly, please ensure that you provide all requested documents.
DO I NEED TO CLOSE MY BANK ACCOUNT(S)?
No. But any funds remaining in your bank account on the filing date may be nonexempt property of your bankruptcy estate. In other words the trustee may seek to compel you to turnover any funds maintained in any of your bank accounts on your filing date, since cash items are generally not exempt. Accordingly, while I cannot advise you to incur new debt, you may consider ensuring your monthly rent, cell phone, and power/electric bills are made prior to your Bankruptcy filing. Also, be aware that simply writing checks and mailing them to your creditors is generally insufficient to deplete your bank accounts. Until those drafts post to your account and the funds are withdrawn, you have money in your bank account which the trustee wants. So, you may want to actually withdraw your funds and issue money orders for any bill payments. Keep track of all these payments since the trustee will likely request proof of how your bank account monies were disbursed (especially if a large sum is withdrawn close to your bankruptcy filing date).
Please keep in mind that you should NOT use bank account money to pay relatives, friends or creditors for preexisting debts or loans. The trustee may seek to recover any monies paid to friends or relatives within 2 years of your Bankruptcy filing. Essentially the trustee accomplishes this by filing lawsuit against these people. You certainly don’t want to subject your friends or relatives to lawsuits, so its best not to make these “preferential” transfers prior to filing your Bankruptcy. However, if you have made such a transfer it MUST be disclosed to the Bankruptcy court. We can still protect friends and relatives through Chapter 13 by repaying your creditors the amount which would have been recovered by the Chapter 7 trustee. If this is an issue you must advise our office if you have not already done so.
WHAT IF I LOSE MY JOB OR MAKE A LOT MORE MONEY?
Generally, if you lose your job or have a loss of income our office can propose a new Chapter 13 plan. Usually, if you miss 1 or 2 payments the trustee will file a motion to dismiss your Chapter 13 case. However, if you advise our office of the circumstances and explain why you fell behind with your Trustee payments your modified plan may be confirmed. You will have to perform under your modified plan. Usually this requires resuming monthly trustee payments and providing a lump sum to catch up on some arrears (to show your good faith effort to remain in Chapter 13).
If your earnings increase significantly the Trustee can petition the Court to dismiss your case or propose a modified plan. However, our firm’s position is that once the initial Chapter 13 is confirmed all foreseeable issues are set in stone and your estate property, including future income, re-vests to you. Ultimately, you may be requested to make an additional distribution to unsecured creditors, but we can cross that bridge when we get to it. However, if something unforeseeable occurs, such as, you win the lottery, settle a large personal injury, claim or receive a large inheritance your estate (and unsecured creditors) will be entitled to an additional distribution from these unforeseeable nonexempt proceeds. Again, if this occurs, let our office know immediately so we can discuss the best course of action for you.
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