How Chapter 7 Bankruptcy Works
If you are an individual, partnership, or other business entity considering bankruptcy, you can qualify for relief under chapter 7 bankruptcy. Filing for chapter 7 can automatically “stay,” or stop, collection actions against the debtor, including phone calls demanding payment, wage garnishments, and creditor lawsuits, while it is in effect. Below, we have briefly outlined how chapter 7 bankruptcy works.
Petition and Filing
A Chapter 7 bankruptcy case begins when the debtor files a petition in bankruptcy court, along with pertinent information regarding the state of their finances, including schedules of assets and liabilities, current income and expenditures, financial affairs, and executory contracts and current leases. They must also provide tax information, including their most recent tax returns and other returns filed during the time of the case.
If the debtor mainly has consumer debts, they have additional filing requirements, and must also provide:
- A certificate of credit counseling along with a copy of the debt repayment plan made during counseling;
- Any evidence of payment received from employers received two months before filing;
- A statement showing monthly net income and any anticipated increases in income expected after filing; and
- Proof of any interest in federal or state qualified tuition or education accounts.
Applicants must also pay the associated filing, administrative, and trustee fees in order to advance their case. Failure to do so will result in a dismissal, but in certain cases the fees may be waived if the debtor’s income level meets the requirements.
Additional Required Information
Debtors preparing to file for Chapter 7 also must include the following information on their petitions:
- A list of their creditors and the amount of their claims;
- The source of a debtor’s income, as well as its frequency and amount;
- A list of the debtor’s property; and
- A list of the debtor’s monthly living expenses, including food, shelter, clothing, utilities, medicine, transportation, taxes, and more.
Regardless of whether married individuals are filing jointly, separately, or if only one spouse is filing, this information must be gathered for both individuals in order to form an accurate picture of the financial position of the household.
After the petition is filed, usually between 20 and 40 days later, the trustee of the case will hold a meeting of creditors. The debtors must answer questions regarding their property and financial affairs and be made aware of the consequences of bankruptcy. If necessary, the debtors can convert their case to a case under chapter 11, 12, or 13, but only if their chapter 7 had not already been converted before.
Do You Need a Bankruptcy Lawyer in Southern California?
Bankruptcy law can be complicated and can require an abundance of paperwork, documentation, and fees. Connect with a Southern California bankruptcy lawyer who is familiar with the process and who can make sure every last detail is taken care of so that your case runs as smoothly as possible.
Act now and call Wadhwani & Shanfeld at (800) 996-9932 to set up a free consultation.