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Chapter 7 Law

Chapter 7 LawBecause recent changes in U.S. law made declaring bankruptcy a much more complicated matter, Storobin & Spodek published a Guide to Bankruptcy. Chapter 7 is the most common form of bankruptcy requested by debtors and does not require repayment. For this reason, our bankruptcy guide focuses particularly on Chapter 7.


Frequently Asked Questions: Chapter 7

  • What is the Chapter 7 bankruptcy and how to get one approved;
  • What documents should I bring to my bankruptcy attorney;
  • Bankruptcy Courts in New York City, Long Island and Westchester;
  • Glossary of bankruptcy and legal terms.

    Necessary Documents

    Chapter 7 bankruptcy starts when the debtor or his attorney files a petition with the New York Bankruptcy Court. In addition to the petition, the debtor or his bankruptcy lawyer must also file the following documents: (1) schedules of assets and liabilities; (2) a schedule of current income and expenditures; (3) a statement of financial affairs; (4) a schedule of executory contracts and unexpired leases; (5) a copy of the tax return.

    Those with predominantly consumer debt must also file a certificate of credit counseling as well as a copy of any debt repayment plan developed through credit counseling; evidence of payment from employers 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.

    Other documents that will likely be needed:

    1. A list of all creditors and the amount and nature of their claims;
    2. The source, amount, and frequency of the debtor's income;
    3. A list of all of the debtor's property; and
    4. A detailed list of the debtor's monthly living expenses, i.e., food, clothing, shelter, utilities, taxes, transportation, medicine, etc.

    Married persons must provide information for their spouse even if they are filing separate individual petitions or if only one spouse is filing. In chapter 7 bankruptcy cases, the income and expenses of the non-filing spouse is required at the time of the evaluation of the household's financial position.


    Exempt Property

    One bankruptcy schedule that is filed is that of "exempt" property. Bankruptcy Courts allow an individual debtor to protect some property from being confiscated when declaring a Chapter 7 bankruptcy. The United States Bankruptcy Code that permits each state, including New York, to implement its own exemption law in place of the federal exemptions. In many cases it is possible to keep your house, car and other property from being seized by creditors.


    C. Stopping Collections, Garnishment and Lawsuits

    Once a chapter 7 bankruptcy petition is filed, it automatically "stays" (legalese for "stops") most collection actions. Though there are some exceptions (e.g., school loans), for a large majority of debtors, lawsuits, wage garnishment and collection calls will stop.


    D. Bankruptcy Court Fees

    Bankruptcy Courts charge a $245 filing fee, a $39 administrative fee and a $15 trustee surcharge. The fees must be paid to the clerk of the court upon filing, though the court may sometimes allow people to pay in installments. With the court's permission, however, individual debtors may pay in up to four installments over up to 120 days. Again, for good cause, the court may extend the number of days to 180, though it is rare.

    In even rarer situations, if the filer's income is less than 150% of the poverty level and he/she is unable to pay the bankruptcy court fees even in installments, the court may waive the requirement. That said, people must understand that everyone filing for bankruptcy is, by definition, undergoing serious economic troubles, so merely citing low income or high expenses will not differentiate them from all other bankruptcy filers.


    E. Means Test

    The Chapter 7 bankruptcy means test is a formula applied to determine whether the debtor has enough moneye to make payments to the creditors in order to make sure that Chapter 7 is available only to those who are truly unable to pay off their debt.

    The means tests compares the debtor's income to the median in his or her state. It then calculates disposable income and unsecured debt.


    F. Meeting with the U.S. Trustee

    After the bankruptcy petition is filed in court, the debtor will be required to meet with the trustee, who will decide whether to approve the bankruptcy. At the meeting, the debtor will be under oath, and the trustee as well as the creditors may ask questions regarding the debtor's financial affairs and property. It is critical for the filer of the bankruptcy to be ready to answer questions properly and to provide all the necessary documents.


    G. Approval of Chapter 7 Bankruptcy and Alternatives

    After the bankruptcy petition and the necessary documents are reviewed, and questions are posed to the debtor, a decision will be made whether to approve Chapter 7 bankruptcy.

    In those cases where it will not be approved, the U.S. Bankruptcy Code allows the debtor to convert a chapter 7 bankruptcy into a chapter 11, 12 or 13, if otherwise eligible under the new chapter. An exception to this rule is where the chapter 7 was itself converted from another type of bankruptcy.

    Call a New York Chapter 7 Bankruptcy Attorney at (212) 748-9243 or (718) 596-3700.

     


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