Chapter 7 Bankruptcy FAQ

• Before filing Chapter 7 bankruptcy everyone must complete a Credit Counseling Course.
• Gather all of the necessary paperwork required to apply for bankruptcy.
  1. Pay stubs for the past 6 months
  2. Tax returns for the past two years
  3. The most recent copy of any debt statement
  4. If you are divorced, a copy of the divorce decree
  5. Bank statements for the last two months
• Apply the Means Test – David can do this for you
• File bankruptcy petition with the court
• Attend meeting with trustee
• Complete a financial management instructional course

Generally, the Chapter 7 bankruptcy process takes 4 months from start to finish. It may take a few weeks for an individual to gather the necessary documents and information to prepare a bankruptcy petition. Once the petition is filed the debtor has a meeting with the trustee. Usually, that is one month after filing your petition. There is a period of sixty days that creditors can object to a discharge. Once that sixty day period has elapsed the bankruptcy court will enter an order discharging your debt.

Chapter 7 is sometimes called straight bankruptcy or liquidation bankruptcy. By law debtors are entitled to keep certain property to help them rebuild. Your trustee will review all of your property and see if you have property in excess of what you are entitled to keep. If you have excess property, the trustee will sell that property and distribute the proceeds to your creditor.

If a creditor calls, give them the name and phone number of your attorney. Once a creditor knows that you are represented by an attorney, they may not contact you directly. If they continue to contact you, keep a log of each time they call, and each time tell them you are represented by an attorney. There are attorneys who specialize in suing creditors who violate the law.

Yes, bankruptcy can stop garnishments, as long as payroll has not been processed. It is best practice to get the payroll department’s fax number so your attorney can fax a notice of bankruptcy directly to your payroll.

If debtors are diligent in taking steps to improve their credit score, their credit score can be back in the normal range in two years.

Steps to improve your credit score include taking a small amount of consumer debt out and consistently repaying that debt. For example, you may get a credit card and each month use it to purchase a tank of gas and then pay the card off each month. You may need to start with a secured credit card.

Generally, within two years your credit score will have improved significantly that you may be approved for a mortgage.

After you file for chapter 7 bankruptcy your mailbox will be stuffed full of offers to lend money to purchase a car. Be cautious in accepting these offers. Most likely the interest rate will be astronomical. If you need a new car, be modest in your purchase.

Historically, landlords would not rent to individuals that have filed bankruptcy in the past two years. However, since the financial crisis in 2008 where bankruptcies have become more common place, most landlords will rent to individuals who have filed.

A debtor in bankruptcy must be honest, forthright and thorough. If a debtor is dishonest or sloppy in the information they provide, the bankruptcy court or the trustee may try to disqualify the debtor from receiving the discharge. You cannot qualify for another discharge for a period of time. It is imperative that you make good use of your fresh start.

Although the question appears to be simple, it is a shockingly complicated question. The fee for your bankruptcy includes representing you at the hearing with the trustee. That is generally what people mean when they ask, “Will you represent me in court?”. However, either creditors or the trustee may start an adversary proceeding against the debtor. There is a separate fee to represent debtors in adversary proceedings.

Adversary proceedings generally stem from misconduct. They are rare and are generally anticipated in advance.

The bankruptcy court’s website provides a video of a bankruptcy hearing so people can see one before they go. You can view the video here

The Court filing fee, the credit counseling course, the financial management instructional course, and any adversary proceedings that may arise.

Yes, declaring bankruptcy will not eliminate child support, spousal support, unpaid taxes, and student loans.