Chapter 7 Bankruptcy: Step by Step

The Chapter 7 bankruptcy process can be described as a series of steps with an end goal of receiving a discharge.  The major steps for a Chapter 7 bankruptcy case are:

The Debt Analysis
The first step in a Chapter 7 bankruptcy will be determining how much debt you have. There are some debts that cannot be discharges such as child support obligations. Also, if you have any property you put up as collateral, the creditor can take that property if the debt is not paid.  Also determining everyone you may owe money to is important.  Having your bankruptcy attorney pull a credit report and public records report is mandatory.

Determining Your Property / Asset Exemptions
The exemption laws vary state by state.  Exemption laws state what type of property you are allowed to keep or in the case of certain property, how much equity.  Determining your bankruptcy exemptions before filing is very important.  Fortunately, an experienced attorney can help you do this in the initial consultation.  Also, it has been our experience the vast majority of people that need to file bankruptcy can do so without losing any assets.

Determining your Eligibility for a Chapter 7 Bankruptcy
If your income for the past six (6) months before the date you initially file for bankruptcy is higher than the median income for your size of family (based on your geographic area), you may not be eligible to file for a Chapter 7 bankruptcy.  The “means test” is what the court will examine to determine your eligibility.  However, it has been our experience that most people that think they do not qualify for a Chapter 7 bankruptcy actually do because of all the available deductions that are allowed in the means test.  Again, an experienced bankruptcy attorney can help you determine if you qualify for a Chapter 7 in the initial meeting to discuss your case.

Making Decisions about your Debts
If you took out a loan and you put up any property as collateral, you will have to pay something to the creditor if you plan on keeping that property. When you initially file for bankruptcy, you will be presented with the choice of either redeeming the property, which means that you pay the creditor the current replacement value of the property, or to reaffirm it; which means that you agree keep the property under the existing finance terms with the creditor.  Also, you can surrender the property, which means that you will let the creditor take the property – and you will no longer owe any money on the property.  However, the creditor may not bother with actually taking the property if they consider it not be worth taking.

Filling out the Chapter 7 Bankruptcy Forms
When filling out these forms you will be telling the court about all of your debts, property, income, and expenses. You will be required to list all of your creditors, state any property you are claiming as exempt, making a decision about your unsecured debts, and state which debts are being disputed.  Your bankruptcy attorney should provide extensive help in completing the forms and answer all your questions.

Filing the Forms
Your bankruptcy case officially start the moment you file the petition. It is common to file all of the forms you have fill out in one instance, however if you find yourself in an emergency, such as your home being foreclosed or your income is being garnished, then It is possible to file a portion of the all the forms required and then file the other forms within fourteen (14) days.

Meet with the Bankruptcy Trustee
Generally, the filer will only need to go to court to meet with the trustee and maybe any creditors that decide to be present, only once.  The purpose of the meeting is to review your case and to have you answer any questions they may have about the information you stated in your forms. This meeting is also known as the meeting of the creditors.

File Any Motions or Objections you May Need or Have
If at any point during your bankruptcy case, you challenge a creditor’s claim against you, you’ll need to address these matters before your bankruptcy case is finalized.  This is also true if you want to remove certain liens on your property.

Acting on Your Debt Decisions
During the initial stages when you filled out your bankruptcy forms, you made a choice concerning certain secured debt and how you would handle each of them. It is important to finalize those decisions before your case is closed.

Getting your Debts Discharged
After all the paperwork is filed, the meetings are done, and the secured debt is taken care of, you arrive at the end. At the end of your bankruptcy case the court will give an order stating that your dischargeable debts have been discharged. You are now no longer liable to pay those debts and the creditors have no right to demand payment.  Also, your case will be officially closed once the bankruptcy trustee has completed all of his or her required duties in your case.