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What can I expect from a Chapter 7 bankruptcy?
Chapter 7 Bankruptcy is a federal court process designed to eliminate most of your debts. The court will appoint a trustee, who will arrange to liquidate all of your assets, with the exception of certain "exempt" assets. Exempt assets are assets cannot be sold to satisfy your creditors. After your non-exempt assets are sold and the funds given to your creditors, all of your remaining debts are discharged (wiped out).
Here is what to expect during the 4-6 month process.
First you will file a petition and some forms with the court. Under penalty of perjury, you will need to list
- all of your income,
- your expenses,
- your property,
- your debts,
- any property that you owned and sold or gave away within the last 2 years,
- money you spent over the last 2 years, and
- exempt property that you believe you will be able to keep.
The court will send out a notice to all of your creditors. The notice will tell the creditor that you have field for a Chapter 7 Bankruptcy and that the creditor is under court order (a "stay") to immediately stop all efforts that they have been making to collect the debts you owe to them.
The court will appoint a person called a "trustee". A trustee will take legal control of your debts and your property (except the exempt property that you get to control and keep).
About a month or six weeks after you file, you will need to attend a hearing called a "meeting of creditors". At this hearing the trustee will look at your papers and ask you questions about your finances. Usually the meeting is pretty short - 10-20 minutes. Sometimes the people or businesses to whom you owe money (creditors) will attend. This is usually the only hearing you will need to attend.
You must now turn over your property. (Sometimes a trustee will allow you to swap exempt property for no-exempt property if it is of equal value.) The trustee will then try to pay your creditors as much as possible by selling your property.
"Discharge" of debts - After a few months, most of your debts will be discharged (eliminated). You cannot file another Chapter 7 Bankruptcy for 6 years.
What can I expect from a Chapter 13 bankruptcy?
Chapter 13 Bankruptcy is a federal court process designed to reorganize and repay your debts. The court will appoint a trustee, who will oversee your court-approved plan to repay your creditors. Under a Chapter 13 plan, some debts will be repaid completely, some will be partly repaid and other debts will be eliminated entirely. If you are successful, after the 3-5 year plan is completed, the court will discharge (eliminate) any remaining debts. Unlike Chapter 7 Bankruptcy, you will not lose any property.
Here is what to expect.
First you will file a petition, some forms and a repayment plan with the court. Under penalty of perjury, you will need to list all of your income, your expenses, your property, your debts, any property that you owned and sold or gave away within the last 2 years, and money you spent over the last 2 years.
You will need to create a repayment plan. The plan must be approved by the court. In the plan you must show how you will pay your monthly living expenses and use your additional income to pay back some of the debts you owe over a 3-5 year period. If you want to keep your house or car, your plan must show that you will be able to keep up the monthly payments and pay the back money that you owe.
The court will send out a notice to all of your creditors. The notice will tell the creditor that you have field for a Chapter 7 Bankruptcy and that the creditor is under court order (a "stay") to immediately stop all efforts that they have been making to collect the debts you owe to them.
The court will appoint a person called a "trustee". A trustee will oversee you case for the next 3-5 years. The trustee will take temporary control of our property.
About a month or six weeks after you file, you will need to attend a hearing called a "meeting of creditors". At this hearing the trustee will look at your papers and ask you questions about your finances. Often the people or businesses to whom you owe money (creditors) will attend, especially if they do not like your repayment plan.
A second hearing will be held before a bankruptcy judge. The judge will decide if you can go ahead with your repayment plan. Once your plan is approved, you will again be able to control your property, except for the portion of your wages that may be deducted for repayment.
Wage deductions - If you have regular employment, the court will probably order deductions from your wages in order to make the payments scheduled under your plan.
After completion of the plan, the court will discharge (eliminate) any remaining debts.
Who can file a Chapter 7 bankruptcy petition?
Almost any individual, partnership, or corporation may file a chapter 7 bankruptcy petition if he or she resides, has a domicile, a place of business, or property in the United States, or a municipality.
If you were granted a chapter 7
or chapter 13 discharge within the last 6 years,
you cannot file again until 6 years have passed.
If you had a bankruptcy case dismissed, you
usually will have to wait 180 days before
you can file again. You can also file
for chapter 7 if you previously filed a chapter 13
bankruptcy plan and paid at least 70% of the
unsecured debt.
Who can file a chapter 13 bankruptcy petition?
You
may file a chapter 13 bankruptcy petition if
you:
(1) reside, have a domicile, a place of business, or property in the United States, or a municipality;
(2) have a source of regular income; and
(3) on the date the petition is filed
you owe less than $307,675
in unsecured debts and less than $922,975
in secured debts (Secured debts
are debts where you signed an agreement to
allow the creditor to recover the property
if you fail to make payments -usually a car
or house).
Corporations and partnerships may not file a chapter 13 bankruptcy petition.
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