| |
Consider Chapter 7 Bankruptcy? What is it?
Let our Kansas City Bankruptcy Attorneys Explain
Below is information about Chapter 7 bankruptcy, including how to qualify, the process, discharge, and non-dischargeable debts. For more information or to speak with one of our Kansas City bankruptcy lawyers, please call our law firm now. When calling, please specify if you need to speak to a Kansas City foreclosure lawyer about current foreclosure proceedings.
CHAPTER 7
To Qualify
There is no minimum amount of debt necessary in order to file for bankruptcy. To qualify for relief under chapter 7 of the Bankruptcy Code, the debtor may be an individual, a partnership, a corporation, or other business entity. An individual cannot file under chapter 7 or any other chapter, however, if, during the preceding 180 days, a prior bankruptcy petition was dismissed due to the debtor's willful failure to appear before the court or comply with orders of the court or if the debtor voluntarily dismissed the previous case after creditors sought relief from the bankruptcy court to recover property upon which they hold liens. In addition, debtors under chapter 7 or any chapter of the Bankruptcy Code are required, within 180 days before filing, to receive credit counseling from an approved credit-counseling agency either in an individual or group briefing. The credit counseling session can be arranged through your attorney and can be taken over the phone or the computer.
Process
A chapter 7 case begins with the debtor filing a petition with the bankruptcy court. In addition to the petition, the debtor must also file with the court: (1) schedules of assets and liabilities; (2) a schedule of current income and expenditures; (3) a statement of financial affairs; and (4) a schedule of executory contracts and unexpired leases. Debtors must also provide the assigned case trustee with a copy of the tax return or transcripts for the most recent tax year as well as tax returns filed during the case (including tax returns for prior years that had not been filed when the case began). Individual debtors with primarily consumer debts must file: a certificate of credit counseling and a copy of any debt repayment plan developed through credit counseling; evidence of payment from employers, if any, received 60 days before filing; a statement of monthly net income and any anticipated increase in income or expenses after filing; and a record of any interest the debtor has in federal or state qualified education or tuition accounts. A husband and wife may file a joint petition or individual petitions. Even if filing jointly, a husband and wife are subject to all the document-filing requirements of individual debtors.
Generally, filing a petition under chapter 7 "automatically stays" (stops) most collection actions against the debtor or the debtor's property. But filing the petition does not stay certain types of actions listed under 11 U.S.C. § 362(b), and the stay may be effective only for a short time in some situations. The stay arises by operation of law and requires no judicial action. As long as the stay is in effect, creditors generally may not initiate or continue lawsuits, wage garnishments, or even telephone calls demanding payments.
Between 20 and 40 days after the petition is filed, the case trustee will hold a meeting of creditors. During this meeting, the trustee puts the debtor under oath and both the trustee and creditors may ask questions. The debtor must attend the meeting and answer questions regarding the debtor's financial affairs and property. Within 10 days of the creditors' meeting, the U.S. trustee will report to the court whether the case should be presumed to be an abuse under the means test described in 11 U.S.C. § 704(b).
Chapter 7 Discharge
A discharge releases individual debtors from personal liability for most unsecured debts and prevents the creditors owed those debts from taking any collection actions against the debtor. Generally, excluding cases that are dismissed or converted, individual debtors receive a discharge in more than 99 percent of chapter 7 cases. In most cases, unless a party in interest files a complaint objecting to the discharge or a motion to extend the time to object, the bankruptcy court will issue a discharge order relatively early in the case – generally, 60 to 90 days after the date first set for the meeting of creditors.
The grounds for denying an individual debtor a discharge in a chapter 7 case are narrow and are construed against the moving party. Among other reasons, the court may deny the debtor a discharge is if it finds that the debtor: failed to keep or produce adequate books or financial records; failed to explain satisfactorily any loss of assets; committed a bankruptcy crime such as perjury; failed to obey a lawful order of the bankruptcy court; fraudulently transferred, concealed, or destroyed property that would have become property of the estate or failed to complete an approved instructional course concerning financial management.
Secured creditors may retain some rights to seize property securing an underlying debt even after a discharge is granted. Depending on individual circumstances, if a debtor wishes to keep certain secured property, he or she may decide to "reaffirm" the debt. A reaffirmation is an agreement between the debtor and the creditor that the debtor will remain liable and will pay all or a portion of the money owed, even though the debt would otherwise be discharged in the bankruptcy. In return, the creditor promises that it will not repossess or take back the automobile or other property so long as the debtor continues to pay the debt.
If the debtor decides to reaffirm a debt, he or she must do so before the discharge is entered. The debtor must sign a written reaffirmation agreement and file it with the court. The Bankruptcy Code requires that reaffirmation agreements contain an extensive set of disclosures described in 11 U.S.C. § 524(k).
Non-dischargeable Debts
An individual receives a discharge for most of his or her unsecured debts in a chapter 7 bankruptcy case. A creditor may no longer initiate or continue any legal or other action against the debtor to collect a discharged debt. But not all of an individual's debts may be discharged in chapter 7. Debts not discharged include debts for alimony and child support, certain taxes, debts for certain educational benefit overpayments or loans made or guaranteed by a governmental unit, debts for willful and malicious injury by the debtor to another entity or to the property of another entity, debts for death or personal injury caused by the debtor's operation of a motor vehicle while the debtor was intoxicated from alcohol or other substances and debts for certain criminal restitution orders. 11 U.S.C. § 523(a). The debtor will continue to be liable for these types of debts to the extent that they are not paid in the chapter 7 case. Debts for money or property obtained by false pretenses, debts for fraud or defalcation while acting in a fiduciary capacity and debts for willful and malicious injury by the debtor to another entity or to the property of another entity will be discharged, unless a creditor timely files and prevail in an action to have such debts declared non-dischargeable.
Revocation of Discharge. The court may revoke a chapter 7 discharge on the request of the trustee, a creditor, or the U.S. trustee if the discharge was obtained through fraud by the debtor, if the debtor acquired property that is property of the estate and knowingly and fraudulently failed to report the acquisition of such property or to surrender the property to the trustee or if the debtor (without a satisfactory explanation) makes a material misstatement or fails to provide documents or other information in connection with an audit of the debtor's case.
Converting to a different chapter: In order to accord the debtor complete relief, the Bankruptcy Code allows the debtor to convert a chapter 7 bankruptcy case to case under chapter 11, 12 or 13 as long as the debtor is eligible to be a debtor under the new chapter. However, a condition of the debtor's voluntary conversion is that the case has not previously been converted to chapter 7 from another chapter. Thus, the debtor will not be permitted to convert the case repeatedly from one chapter to another.
Serving: Kansas City Missouri, Kansas City Kansas, Overland Park, Blue Springs, Lee’s Summit, Grandview, Raytown, Independence, St. Joseph, Warrensburg, Harrisonville, Belton, Louisburg, Leawood, Olathe, Paola, Lenexa, Shawnee, Shawnee Mission, Bonner Springs, Leavenworth and Atchison.
NEITHER THE SUPREME COURT OF MISSOURI NOR THE MISSOURI BAR REVIEWS OR APPROVES CERTIFYING ORGANIZATIONS OR SPECIALISTS DESIGNATIONS. |
|
Kansas City, Missouri 64112 