How To File Chapter 7 Bankruptcy
When a person wants to understand how to file chapter 7 bankruptcy, there are several steps involved that the lawyer will review with the client, so that a full understanding of the process is realized. First, the person with the financial difficulty should seek out a lawyer that specializes in these types of filings. The attorney will most likely explain the differences between a chapter 7 filing and a chapter 13 filing. Then, all the advice the lawyer gives should be followed exactly and no information should be held back by the client regarding assets owned or creditors owed. The attorney cannot effectively help someone that is not entirely forthcoming about the financial difficulties being experienced at the time. Once a good lawyer has been obtained, then a process of information gathering begins to reveal the clients financial status such as income, property owned, creditors owed, etc. This may be termed as a full financial disclosure.
When learning how to file chapter 7 bankruptcy, the client will learn that a meeting must take place between the person in financial trouble and the creditors in order to give them an opportunity to ask questions about the debts owed. If no creditors object to the debt for statutory reasons, then the petition will be filed and soon after, the discharge will go through. This could be as soon as 60 days or as late as three months, depending on what happens at this meeting. Also, at some point in the how to file chapter 7 bankruptcy process, the client will be asked to go through a credit counseling process and perhaps even a debtor education course, so that the person will have additional knowledge of how to structure personal finances to begin rebuilding the credit rating. Going through the credit counseling will result in the client obtaining a certificate, and it is this document that alerts the creditors not to try to collect on the bad debts or try to take any legal action. Rebuilding a credit rating can take quite a bit of time, so patience is important.
Once the petition has been filed, the creditors that are owed money cannot come after the person who owes the money. This is called an automatic stay from court. Also, there can be no legal action taken against the debtor. Therefore, all those annoying creditor calls will go away. Learning how to file chapter 7 bankruptcy will provide information showing that this procedure is for those owing a lot of unsecured debt such as money owed to credit card companies, unsecured loans and possibly medical debt. This type of bankruptcy may required the person to sell personal property in order to pay off some of the money owed, whereas in chapter 13 bankruptcy, the person may have suffered a financial setback due to a job loss or a long term illness and just needs some time to get back on their feet. For this situation, the chapter 13 filing can provide relief by staying the creditors from legal action and collection, but give the debtor time, over a course of a few years, to pay back the loans or bills. This can help stop any actions to take away a house or possessions. Not participating in the credit counseling can mean the case could be rejected or thrown out.
Learning how to file chapter 7 bankruptcy will reveal that chapter 7 is quicker than chapter 13, because 13 allows the client to utilize current income to pay back creditors, the secured debt first and unsecured after that. The order of payment is set by the US Bankruptcy Code. Filing 13 however also requires completion of a debtors course or the discharge will not be granted. Any unsecured debt that remains after the payment plan has been fully executed and completed will be discharged.
The client considering how to file chapter 7 bankruptcy must understand that a test is given to reveal if the client is even eligible. The debtor must fall between certain limits for secured and unsecured debt. If a person does not qualify for one type of bankruptcy, then perhaps the other type of bankruptcy will be suitable. The test will determine how much income is available to pay the debts after the persons allowable expenses have been deducted. Then the outstanding debt is multiplied by .25. The debtors usable income cannot be over 25% of unsecured debt over a period of five years to pass the chapter 7 bankruptcy test. When deciding a persons qualifications, the debtors income is compared to the state median income. "But I have greater witness than that of John: for the works which the Father hath given me to finish, the same works that I do, bear witness of me, that the Father hath sent me" (John 5:36).
A new bankruptcy law ensures that those who could pay back debt do so. This effectively helps to weed out those seeking unnecessary relief. However, in understanding how to file chapter 7 bankruptcy the debtor will come to know that this law will not preclude most people from filing anyway. If this needs to be done, most likely it will be done and the attorney will probably advise the client to proceed. How to file chapter 7 bankruptcy is not difficult when the process is clearly laid out for the person in need. The individual should just ensure that all processes are followed, all courses and education is taken and all necessary forms are filed in a timely manner. In this way, the entire undertaking will take less time and run more smoothly for everyone.
Chapter 7 Bankruptcy ExemptionsMany people are curious about what chapter 7 bankruptcy exemptions are and what they might mean to their particular situation should they choose the option of court liquidation of assets. This legal proceeding is the proceeding most people think of when they think of bankruptcy, but even in this drastic act of debt relief, the debtor can keep some personal property. These are called chapter 7 bankruptcy exemptions and will be different from state to state. There are some federal exemptions for this legal proceeding which include things like retirement benefits for a number of federal workers including CIA employees, Foreign Service workers, railroad workers, social security and veteran's benefits. In addition, survivor's benefits for certain federal judges and other workers are exempt as well as death and disability benefits for all federal employees and longshoremen.
There are many differences from state to state on the chapter 7 bankruptcy exemptions that are allowed from this legal proceeding and so a person considering such a legal action should do their homework and check with various resources for an exhaustive list. However the following information is for general purposes and can be of value to gain a perspective on the exemption process. Many television ads that are sponsored by bankruptcy attorneys often state that someone filing this most drastic form of debt relief will not lose their home. That may or not be true. For example, in Texas the homestead exemption is unlimited as long as the property is no more than an acre in a city or town and two hundred acres for a family outside incorporated limits. In Vermont, only homestead property up to seventy five thousand dollars is exempt and in Missouri only eight thousand dollars is exempt in a homestead. In Oklahoma, a person's homestead is exempted no matter how much value it has.
Chapter 7 bankruptcy exemptions in Louisiana for insurance include all life insurance proceeds except if policy was issued within nine months of the liquidation filing. In Minnesota, life insurance proceeds are exempt only to thirty two thousand dollars, while in New York the only way to keep proceeds is if the policy includes a clause prohibiting proceeds from being used to pay creditors. In many states the pensions of most person's are exempt, but each state may have different interpretations. Jesus made it clear that losing one's property pales with losing something else. "For what shall it profit a man, if he should gain the whole world and lose his own soul?" (Mark 8:36)
It becomes wildly entertaining when considering each state's chapter 7 bankruptcy exemptions for personal property. In California all appliances are allowed to be kept while in Oregon only three thousand may be kept of the total value of furniture, appliances, utensils, household items, radios and televisions. In New Jersey, only a thousand dollars of total value of furniture and household goods. In Texas, 12 head of cattle, two horses or mules are exempt along with a hundred and twenty chickens, while in Louisiana a debtor can only have a single measly cow and five appliances. In South Dakota a debtor can keep two cows and five pigs, twenty five sheep and food to feed them for a year. In one state, a four wheeler ATV for each member of the family is exempt, while in another state only a single motor vehicle worth less than a thousand dollars can remain.
It may be of some comfort to know that most states' chapter 7 bankruptcy exemptions include burial plots. Hawaii allows up to two hundred and fifty square feet of burial space including monument and fencing as being exempt, but Iowa allows a full acre. Iowa also only allows a thousand dollars of clothing to be exempt while other states allow unlimited clothing to be kept. Oklahoma allows all burial plots no matter the sizes and also two saddles and bridles but never mentions horses being exempt. In Minnesota a debtor can keep a church pew that he owns as well as all musical instruments and a Bible. In fact, many states do mention the Bible specifically as one of the first properties included in chapter 7 bankruptcy exemptions from the auctioneer's gavel.
In Nevada, a debtor may keep his cabin if he is a miner, and in Georgia no tools over five hundred dollars in value may be exempt. In Pennsylvania not a single tool of the trade is allowed to be exempt but in Tennessee nineteen hundred dollars worth of tools for one's trade, including books for school teachers or lab equipment for chemists can be exempt. When it comes to wages that are garnished, Connecticut allows seventy percent of wages to be exempt, while in Michigan the head of the household may keep sixty percent of the earned wages. In South Carolina none of a debtor's wages may be garnished but in Alaska, net earnings of three hundred and fifty dollars a week are exempt. In Rhode Island only wages up to fifty dollars a week are exempted while the wages of a spouse are one of the chapter 7 bankruptcy exemptions fully covered under the state's law.
As the reader can see the range of exemptions swings wildly from state to state. But there is one important truth from all of them. Filing chapter seven proceedings is a life altering event. This action affects the whole family quite significantly and the proceedings should not be taken without much counsel from not only financial experts, but also counselors trained to advise in these matters. After all, it's not just about losing property, it's also about losing the connection to things that one has held as dear for perhaps a lifetime.