Chapter 7 Bankruptcy Information
There are many things to be considered when filing for a Chapter 7 Bankruptcy:
The potential consequences of seeking a discharge in bankruptcy, including the effects on credit history; The effect of receiving a discharge; The effect of reaffirming a debt; and The alternative options available under the Bankruptcy Code for filing a petition. There are many other provisions of the Bankruptcy Code that may affect a debtors situation. You should consult an attorney for further information as to how the bankruptcy laws apply to your specific case. The chapter trustee is not permitted to give legal advice to debtors or to creditors.
Chapter 7 Trustee and Estate Administration:
In chapter 7 cases, a trustee, who is a private individual appointed by the United States Trustee, has the responsibility to administer the bankruptcy estate, which consists of virtually all of the debtors property as of the date of filing. However, some assets are exempt from bankruptcy under state law, and may be so designated by the debtor in the petition. It is the duty of the trustee to identify, collect and liquidate (i.e., sell) the debtors non-exempt assets. Debtors are required to fully cooperate with the trustee in that effort.
341(a) Meeting of Creditors:
At the 341(a) meeting of creditors, the trustee will examine the debtor under oath regarding assets and liabilities. Any creditors who appear will also be given an opportunity to ask general questions of the debtor. The debtor must attend the 341(a) meeting of creditors. If a husband and wife filed a petition, both must be present. The debtors attorney should also attend. If the debtor fails to appear at the 341(a) meeting, the case can be automatically dismissed.
Obtaining a discharge:
The filing of a chapter 7 petition is designed to result in a discharge of most of the debts listed on the bankruptcy schedules. The discharge only applies to debts that arose before the date the debtor filed. A discharge is an order issued by the court that says debts do not have to be repaid, but there are a number of exceptions. Debts that cannot be discharged in a chapter 7 case include, for example, most taxes; child support or alimony; most student loans; court fines and criminal restitution; debts that were incurred through fraud or deception; and personal injury debts caused by driving under the influence of alcohol or any controlled substance. A discharge may be denied entirely if, for example, the debtor destroys or hides property, destroys, hides or falsifies records, make a false oath, or disobeys a court order. Creditors cannot collect on discharged debts; however, the creditors who hold a security claim can still take the property. A debtor can obtain a chapter 7 discharge once every eight years.
Potential Effects of a Discharge:
The fact that a bankruptcy has been filed can appear on an individuals credit report for as long as 10 years. Thus, filing a bankruptcy petition may impair the ability to obtain credit in the future. Also, a debtor will not be excused from paying any debts that are not listed on the bankruptcy schedules or any debts that are incurred after the bankruptcy is filed.
Effects of Reaffirming a Debt:
After filing the petition, a debtor may want to repay a particular debt or a creditor may ask the debtor to promise to pay the debt. To promise to pay the debt, the debtor must sign and file a reaffirmation agreement with the court which is a legally enforceable document promising to pay all or a portion of the debt that may otherwise have been discharged in the bankruptcy case. Reaffirmation agreements are strictly voluntary – they are not required by the Bankruptcy Code or other state or federal law. The debtor can voluntarily repay any debt without signing a reaffirmation agreement, but there may be valid reason for wanting to reaffirm a particular debt. Reaffirmation agreements must not impose an undue burden on the debtor or the debtor’s family and must be in the debtor’s best interest. An agreement to reaffirm a debt may be canceled at any time before the court issues a discharge or within sixty days from the date the reaffirmation is filed with the court, whichever gives the debtor the most time. If a debt is reaffirmed and the debtor fails to make the payments required in the reaffirmation agreement, the debtor owes the debt the same as though there was no bankruptcy. The creditor can take action to recover any property that was given as security for the loan. Reaffirmation agents, who work for individual creditors, are sometimes present at the 341(a) meeting and will approach debtors to urge them to reaffirm their debts. A debtor has no obligation to speak with these agents, and, if the debtor is represented by counsel, their attorney should be present at any such discussions.
Other Bankruptcy Options:
Debtors have a choice when deciding what chapter of the Bankruptcy Code will best meet their needs. Even if a debtor has already filed a petition under chapter 7, it may be possible to change the case to another chapter. As described before a chapter 7 is the liquidation chapter of Bankruptcy Code. Under chapter 7, a trustee is appointed to collect and sell, if economically feasible, all of the debtors property that is not exempt from the bankruptcy proceeding.
Risk of Civil and Criminal Penalties:
Debtors who obstruct the efforts of the trustee risk civil and criminal penalties, which can include fines of up to $250,000 and prison terms of up to 5 years. Federal bankruptcy crimes include knowingly and fraudulently concealing assets, making false oaths, declarations or accounts, presenting a false claim against the estate, transferring or concealing property, and destroying or concealing books, records and documents.
Role of the United States Trustee:
The United States Trustee appoints and supervises the chapter 7 trustees as well as monitors compliance by debtors.
Chapter 13 Bankruptcy Information
What is a Chapter 13?
Bankruptcy is one method under the Bankruptcy Code to obtain relief from your creditors while at the same time providing a fair means to pay them back as much as you can. Chapter 13 has gained widespread acceptance across the country as an attractive alternative to Chapter 7 liquidation bankruptcy. Individuals who file for Chapter 13 bankruptcy are commonly referred to as debtors.
Protection from Creditors:
Chapter 13 protects individuals from the collection efforts of creditors; allows individuals to keep their real estate and personal property; and provides individuals an opportunity to construct a plan for repayment. The terms are determined by a number of factors: including the amount the debtor can afford after paying living expenses and whether unsecured creditors would receive at least as much in the Chapter 13 case as they would if the debtor filed for bankruptcy under Chapter 7.
The Chapter 13 Standing Trustee:
A Trustee will be assigned to your case. The Trustee represents the bankruptcy estate. The Trustee in not a legal representative for any creditor. The primary function of the Trustee is to administer the bankruptcy estate, i.e. oversee timely receipt of your plan payments and make prompt and accurate payments to your creditors. The Trustee also provides information about Chapter 13 cases to debtors, creditors, and to the court. Neither the Trustee nor any member of her staff may give you legal advice.
The purpose of a case number:
Your case number will begin with two letters, according to the division where you filed, your number, then followed by the initials of the assigned judge. This number is very important. You will need it whenever you write to the Trustee or when you make a payment to the Trustee. Always print your case number on any payment, letters, or other documents you sent to the trustee.
When your attorney agrees to represent you and signs your petition with you, your attorney becomes obligated to appear and represent your interests throughout the life of your Chapter 13. Your attorney must continue to appear on your behalf as long as your case is active or until the judge permits your attorney to withdraw from your case. If you have any questions regarding your case, you should contact your attorney first. Your attorney must explain to you how much you will pay in legal fees and how your attorney expects the fees to be paid. Be sure that you have discussed fully whether additional legal services during the life of your plan will cost you more money or whether the initial fee will cover all legal services. In some cases, your attorney may agree to be paid allowed fees through the Chapter 13 Plan. However, all fees charged by your attorney must be reviewed and approved by your Bankruptcy Judge, even if you agree to pay more or pay them outside the plan. For this purpose, your attorney must submit a fee application to the Trustees recommendation. (The Trustee then forwards the fee application) The law prohibits the Trustee and the Trustees staff from giving you legal advice; you must contact your attorney.
Debtors in PRO PER:
While use of an attorney is encouraged, it is not required. You may choose to proceed on your own, with or without an attorneys assistance. If this is your decision, you should understand that you would be fully responsible for representing yourself, e.g. following the law and properly filing all documents and motions. Also, be prepared to disclose at the 341(a) meeting the name, address, telephone number, and amounts you paid anyone who helped you with your filing. Bring all documents and motions.
341(a) Meeting of Creditors and Confirmation Hearings:
Once you file your Chapter 13 petition, the court will stamp on it your 341(a) meeting date. At this 341(a) meeting of creditors, the Trustee will collect plan and mortgage payments and will ask you questions, under oath, about your assets, your liabilities and the feasibility of your plan, for example: everyone you owe money to, everything you own, all the sources of your income, the reasonableness of all your budgeted expenses and whether your proposed plan payments are sufficient to pay off your creditors during the term you propose. Any creditors who appear will also be given an opportunity to ask questions. This meeting will be recorded and copies of the tape may be requested from the Office of the United States Trustee. The debtors and their attorney are required to attend the 341(a) meeting. If husband and wife filed a petition, both must be present. THERE ARE NO ACCOMMODATIONS FOR CHILDREN. The Trustee will recommend that the Court confirm your legal plan if the Trustee believes the plan complies with the legal requirements for Chapter 13 cases. If the Trustee determines that the plan is deficient, you will be informed of the deficiencies. At the confirmation hearing, your Judge will determine if your plan should be approved.
All your payments must be in the form of a cashiers check, certified check, or money order. Cash, personal checks and second party checks are not accepted. Your case will be considered delinquent if you do not make the payments in full and in the proper form. Plan payment must be made payable to Chapter 13 Trustee. Mortgage payments must be made payable to the lender. Always write your name and case number on all plan and mortgage payments. If you do not include the required information on all payments, they will not be accepted. This will cause a delay in properly crediting the payments to your account, making your account delinquent, and possibly, cause your account to be dismissed.
DO NOT MAIL YOUR PAYMENTS BEFORE CONFIRMATION:
You are advised to refrain from mailing your pre-confirmation payments. Until the court has approved your plan, bring all plan and mortgage payments with you to the hearing. In the event however, that you mail a payment and the payment is lost or delayed, your case may be dismissed if the Trustee has not received the payment by the date of any hearing in your case. It is therefore safer and wiser to simply give your payments to your attorney before each hearing until your plan is confirmed. The trustee does not accept payments in his/her office, for reasons of security and accounting control.
DELINQUENT PLAN PAYMENTS:
If you fail to make the payments to the Trustee as required by your plan, the Trustee will ask the court to dismiss your case or issue a payroll deduction from your employer. Therefore, it is very important to contact your attorney not the Trustee if you ever expect to miss a payment due to a lay off, medical disability or job change. If your case is dismissed, you may not be eligible for any kind of bankruptcy relief for six months, so it is important for you to talk to your attorney if you know of any reason why the Trustee will not receive a payment. Remember, the Trustees office has no authority to let you miss a payment, make a payment late, allow you to pay less than your plan requires or change your payment date. Only the court can make such decisions. When you expect that you will not be able to meet the obligations of your plan, you should contact you attorney immediately to ask the court to change the requirements of your plan in order to accommodate your changed circumstances.
CONTACTS BY CREDITORS:
Creditors who are listed in your Chapter 13 filing are under an automatic restraining order, which prohibits them from attempting to collect money or property from you without a court order. If you get telephone calls or notices in the mail from your creditors, send them to your attorney. Be sure to tell your attorney the name of the person who contacted you. Your attorney may want to follow up on such a call, so the name of the person contacting you is very important.
Complying with a Chapter 13 plan is not easy. You may have to make a real sacrifice to meet the obligations, which you have specified in your plan and still live within your Chapter 13 budget. Many families have successfully completed their Chapter 13 plans and know that they have resolved their debt problems without filing a Chapter 7 liquidation bankruptcy and have paid most, if not all, of their obligations to their creditors. Chapter 13 will only work for you if work very hard at meeting your obligations under your plan.