In theory, a Chapter 7 bankruptcy is a liquidation proceeding in which the debtor’s non-exempt assets, if any, are sold by the Chapter 7 trustee and the proceeds distributed to creditors. However, in most consumer cases, all the assets are exempt, leaving no assets to liquidate and no dividends to creditors. Chapter 7 bankruptcy is generally the simplest and quickest form of bankruptcy and is available to individuals, married couples, corporations and partnerships.
Chapter 7 Bankruptcy
Filing Chapter 7 The case begins by filing the official petition, schedules and statement of financial affairs. These forms ask you to list all of your assets and all of your debts, along with some recent financial history. This is the most important and most time consuming part of a bankruptcy filing.
When you file Chapter 7 bankruptcy in Dayton you will attend a meeting in downtown Dayton. When you file Chapter 7 bankruptcy in Cincinnati you will attend a meeting in Cincinnati. It is important that every creditor is listed in the schedules with an accurate mailing address. You must list all of your debts, even if the debt is non-dischargeable, and even if you intend to reaffirm the debt. The schedules also list your property, any debts secured by that property, and the sale value of the property.
“Property” here means “assets” or “possessions”, not just real estate. All property must be listed even if nothing is owed on it. Property included any tax returns you may be eligible to receive. The schedules are signed by the debtor under penalty of perjury. For most purposes the rights of the debtor and the creditors are those that exist on the day the case is filed. All of the proceedings in bankruptcy after the filing relate to the situation as it was on the day the case was filed. There are some exceptions, most notably insurance or inheritance rights.
In most cases, the Automatic Stay goes into effect upon filing the petition, creating a legal barrier to collection actions by creditors. The court appoints a trustee and gives notice to all creditors listed in your schedules that you have filed bankruptcy. You will get a copy of that notice at the same time it is sent to creditors.
There is a meeting called first meeting of creditors. The debtor must appear at the “first meeting of creditors” (also called the § 341 meeting from the section of the Bankruptcy Code that describes the meeting.) The trustee can ask the debtor questions under oath about assets and liabilities. Creditors can also question the debtor on those subjects, but seldom attend the meeting. Debtors are required to have all the documents specified by the attorney, and proof of identification, photo ID, and Social Security Number, at the meeting.
Chapter 7 Bankruptcy
If there are assets which are not exempt, the trustee takes control of those assets. Again, this seldom is the case as most Chapter 7 cases are “no asset” cases, in which the debtors lose no property at all. From the sale of assets or the recovery of avoidable transfers, the trustee pays the expenses of the administration of the case, and then distributes any remaining funds to creditors.
The trustee may review your income and expense schedule to see if you have enough money left after your current living expenses to pay something to creditors. If there is enough money after living expenses to make a “meaningful” payment on your debts, the trustee could refer the case to be investigated to see if “abuse” is present, and this could result in dismissal of the Chapter 7 case or a conversion to chapter 13. Any wages the debtor earns after the case is begun are the debtor’s, beyond the reach of creditors who had dischargeable claims on the date of filing.
Generally, the only responsibilities the debtor has with respect to the bankruptcy after the 341 meeting is to cooperate with the trustee in providing any information requested by the trustee. If the debtor files a reaffirmation, then he is expected to perform on the expressed intentions to return, redeem or reaffirm debts secured by personal property. Debts should be current in order to reaffirm them.
Objections to discharge. Creditors and the trustee have a 60 day period from the 341 meeting in which they may challenge the debtor’s right to a discharge (Bankruptcy Code § 727) or the dischargeability of a particular debt by filing an adversary unless an action to deny the debtor a discharge is filed, the order providing for the discharge of debts is issued by the court shortly after the 60 day period expires. The filing of a contest to the discharge of one debt does not prevent or delay the entry of a discharge of the balance of the debtor’s debts.
Then, after your chapter 7 bankruptcy is over, Dayton Bankruptcy attorney Richard West, who is also a certified credit counselor, can help you to rebuild your credit with his exclusive credit coaching program. Chapter 7 bankruptcy is a great way to begin your financial recovery. But without more, your “fresh start” could be a “false start.” The coaching program to rebuild your credit is essential to a full recovery. Only Dayton bankruptcy attorney Richard West is proven to quickly rebuild credit after chapter 7 bankruptcy.