Chapter 7 Bankruptcy
Chapter 7 Bankruptcy is the most common type of bankruptcy filing. Often called a “straight bankruptcy,” Chapter 7 can allow you to wipe out all of your debt without the obligation to pay anything back.
In most cases, Chapter 7 is quick, cost-effective, painless and will give you the fresh start you deserve.
While Chapter 7 Bankruptcy is a “liquidation,” the reality is that in most cases, debtors can exempt one hundred percent of their property. Montana residents who decide to file Chapter 7 Bankruptcy will most likely emerge debt free with all of their assets intact.
It is very important to understand what property is exempt before filing a Chapter 7.
Qualifying For Chapter 7 Bankruptcy | Means Test Requirement
Since 2005, there is an income based eligibility requirement that must be met before you can file Chapter 7 Bankruptcy. This requirement is known as The Means Test.
Means Test eligibility is determined based on one’s family size, family income and certain standardized and allowable deductions. Generally, if your average monthly income for the six month period prior to filing is below the median income for your state, you pass and are able to file Chapter 7 Bankruptcy. If not, you will be required to file a Chapter 13 Bankruptcy.
Do not be discouraged!
The means test is not as scary as it sounds and in the vast majority of cases, people considering Chapter 7 Bankruptcy have no problem passing the means test.
The Automatic Stay
The filing of a Chapter 7 Bankruptcy Case automatically triggers the Automatic Stay.
The Automatic Stay is one of the most powerful tools available in law.
The stay is an automatic injunction against an creditor activity including: Foreclosure, Wage Garnishment, Bank Liens, Automobile Repossession, Eviction, Telephone Calls, etc.
The Automatic Stay remains in effect for the duration of the Bankruptcy Case and becomes permanent upon discharge.
Section 341 Meeting of Creditors
After the filing of the case, every Chapter 7 debtor will be required to appear at a Meeting of Creditors. It is an odd name as in most cases, there are no creditors at this meeting.
The Meeting of Creditors is an informal court hearing typically scheduled approximately thirty days after the filing of your case. You do not appear in front of a Judge.
The meeting is held in an open room and the questioning is conducted under oath by a court appointed Bankruptcy Trustee. The trustee will ask questions pertaining to the contents of the bankruptcy petition and make inquiries about the debtor’s assets.
Don’t worry, the 341 meeting is not a test, nor is it an inquisition.
Most 341 meetings are short, sweet, uneventful and finalize the case.
Discharge
The ultimate goal of your Chapter 7 Bankruptcy is to get your discharge.
This is the finish line and it opens the door to your fresh start.
A bankruptcy discharge releases the debtor from all personal liability for certain specified types of debts. The debtor no longer has any legal obligation to pay a debt that has been discharged.
Creditor collection activity on a discharged debt is also prohibited. This includes legal action, telephone calls and collection letters.
The Bankruptcy Discharge is extremely powerful and violation of the discharge order by creditors is a violation of Federal law.
In most cases, assuming there are no mitigating circumstances, a Chapter 7 debtor will automatically receive the discharge sixty days from the first Meeting of Creditors.
*It is important to understand that the above information highlights only some of the procedural aspects to a Chapter 7 Bankruptcy Case. For more information and for a full evaluation of your case, please contact my office to schedule a free consultation.