Are you considering filing bankruptcy under Chapter 7? Straight bankruptcy, also known as liquidation bankruptcy, is a bankruptcy case wherein the court wipes out most of your debts. A bankruptcy filing is a straightforward process that takes about four to six months. Here’s an overview of things you need to consider regarding qualifications, proceedings, and filings before your meeting with creditors.
Debtors like you are qualified to file for bankruptcy except in cases where you have already received a bankruptcy discharge in the last six to eight months; or you could complete a Chapter 13 repayment plan based on your current income, debt burden, and expenses.
Consult with a bankruptcy lawyer if you are unsure whether you qualify for filing bankruptcy.
Starting Your Bankruptcy Application
If you qualify, you must first complete the mandatory credit counseling, whether by phone or online, with an agency that is approved by the United States Trustee before you file bankruptcy.
Begin the bankruptcy process by filling out the official bankruptcy court forms. The files for bankruptcy include a bankruptcy petition, which provides information about you and your case, as well as a series of schedules detailing your financial situation, among various other forms. These forms will ask you to describe information regarding:
- your current income and monthly living expenses;
- your debts;
- your property;
- any property you claim to be exempt;
- any property you owned and money you spent in the past two years; and
- any property you sold or gave away in the past two years.
After submitting the completed forms to the bankruptcy court, a bankruptcy trustee is assigned to handle your case and ensure that your papers are complete. Trustees are also tasked with finding the nonexempt property to sell for the benefit of lenders, which entails examining a borrower’s financial transactions in the previous years to see if it is possible to free up assets.
You are required to mail a copy of your most recently filed income tax returns, and other documents asked of the debtor, to the trustee.
Once you have filed your bankruptcy forms, an injunction called the “automatic stay” is put into effect. The stay prevents most creditors from trying to collect your debt so that your wages or properties cannot be legally grabbed or taken from you.
However, when you declare bankruptcy under Chapter 7, you are legally placing your debts and properties in the hands of the bankruptcy court. As such, you are unable to pay off your pre-filing debts and transfer or sell your properties without the consent of the court.
Note that it is possible for the stay to be lifted in cases regarding secured debt. Loans with property pledged as collateral, and recorded liens against your property, are both considered secured debt. Creditors can ask for the stay to be lifted in order to foreclose or repossess on the property if you are behind on your payments. If not, you may continue making payments as before, except in the case where there is enough equity in the property to justify its sale by the trustee.
During Your Scheduled Creditors Meeting
A few weeks after filing, you will receive a notice about a scheduled meeting with creditors. The meeting is usually held in a small hearing room and is commonly the only courthouse appearance required of you. During the appointment, you are required under oath to answer questions about the forms you filed, or provide the trustee with additional information relevant to your case.
If the trustee deems some of your property to be nonexempt, you may be required to either turn over the property or pay-back its equivalent value in cash. However, you can keep the property if the trustee “abandons” it because it isn’t worth very much or is too cumbersome to sell. Property exemptions vary depending on your state’s bankruptcy laws. Check your state’s bankruptcy exemptions or consult with a bankruptcy attorney.
Receiving Your Bankruptcy Discharge Notice
After bankruptcy proceedings, your debts are discharged by the court, except for those that automatically survive bankruptcy, such as child support, tax debts, and student-loan, unless the court rules otherwise, or those declared nondischargeable due to the creditor’s objection.
If you are considering declaring bankruptcy in Oregon or Washington, contact Northwest Debt Relief Law Firm for a free consultation today.