Assistance with Chapter 7 Bankruptcy

Do you find yourself:

If this describes your life, you may want to seek professional advice concerning the possibility of filing a Chapter 7 Bankruptcy. In certain circumstances, a Chapter 7 Bankruptcy will provide a debtor a fresh start by eliminating most if not all debts while allowing the debtor to keep most or all of their property. Once the debtor receives his or her bankruptcy “discharge,” these debts are permanently eliminated, giving the debtor the opportunity for a financial fresh start.

After the filing of a Chapter 7 bankruptcy case, the “automatic stay” contained in the Bankruptcy Code immediately stops almost all collection activity. The automatic stay automatically and immediately stops all wage garnishments, mortgage foreclosures and car repossessions.

Take the first step to financial freedom - call our office at (301) 656-4424. An attorney in our firm will be happy to answer general questions about Bankruptcy or to set up an appointment to meet with you about your particular financial problems. You can set up a FREE 30 minute consultation by calling or filling out our free phone consultation request form.

Chapter 7 Bankruptcy - In General

A filing under Chapter 7 is often called a liquidation or straight bankruptcy and is the most common type of bankruptcy proceeding. In a Chapter 7 case, a Debtor is allowed to exempt (meaning keep) all or a certain portion of his or her property. In most cases, the debtor keeps all property. However, each person and situation is different, and the actual amount that can be retained (the “exempt” amount) by a specific debtor is determined by the market value of the debtor’s property in terms of dollars, the type of the property owned by the debtor (for example, a retirement account), and/or the manner in which the property is owned by the debtor (for example, whether the property is owned individually by the debtor or jointly by the debtor and a spouse).

Property that a debtor is entitled to keep is called “exempt property” and property that the debtor is not entitled to keep is considered “non-exempt property”. A trustee, called the Chapter 7 Trustee, is appointed by the bankruptcy court to collect the non-exempt property of the debtor, sell it, and distribute the sale proceeds to creditors. However, the vast majority of Chapter 7 bankruptcies are "no-asset" bankruptcies, meaning cases in which the debtor is permitted to keep all of his or her property and nothing is distributed to creditors.

Stop Creditor Harassment

Once you have filed for protection under the bankruptcy laws, the “automatic stay” stops almost all collection activity against you, including car repossessions, mortgage foreclosures, collection agency calls and harassment and lawsuits by your creditors. Certain narrow exceptions to the automatic stay do exist, for example, the collection of child support obligations. However, almost all other creditor action and contact must stop, including tax levies and wage garnishments. After a bankruptcy filing, you should not receive any more collection agency telephone calls, lawsuits and wage garnishments will stop, and threatened foreclosures and repossessions must be cancelled.

Your Property

In the vast majority of the Chapter 7 cases, the debtor keeps all of his or her property. These kinds of cases (in which the debtor keeps all of his or her property) are called “no-asset” cases. Bankruptcy law is not meant to punish a person in financial trouble, but rather, it is intended to provide the honest debtor with a financial “fresh start.”

In order to help you get your fresh start and support your family, the federal government and all states allow you to keep certain property called “exempt” property. The amount and kind of "exemptions" (things you get to keep) available to you are generally determined by your state exemption laws. State and federal exemption laws are complex, and the particular exemptions available to you are most likely one of the most important issues in your case.

Although it is very possible that you will be able to keep your house, your car, and all of your other property in a Chapter 7 case, our firm strongly recommends that you consult experienced, knowledgeable legal counsel to determine the exemptions that will be available to you in your particular case.

Your Bankruptcy Case

A Chapter 7 bankruptcy case is a proceeding “at equity” involving you, your property and your creditors. If you are an individual, you are entitled to represent yourself or hire an attorney to represent you. The interests of your creditors are represented by a Chapter 7 Trustee who administers your non exempt property for the benefit of your creditors. Although most debtors are able to keep all of their property (generally, creditors receive nothing in the typical Chapter 7 case), the Chapter 7 Trustee will review your bankruptcy petition, schedules and documents to determine whether you have non-exempt property that should be sold for the benefit of your creditors.

Once filed, a Chapter 7 Bankruptcy case usually lasts approximately 4-6 months. During that time period, you will be required to attend an administrative hearing conducted by your Chapter 7 Trustee where you will be required to answer questions about your assets and financial affairs. This hearing is called a “Meeting of Creditors” or “341 Meeting.” Although all of your creditors are invited to attend, it is unusual for creditors to attend, and more unusual for them to ask any questions at the hearing. If you engage our firm to represent you in your bankruptcy case, one of our attorneys will explain what happens at that hearing, prepare you for your appearance, and defend you at the hearing.

Eligibility to File Chapter 7

The single most important qualifying fact in determining your eligibility for filing a Chapter 7 Bankruptcy is whether your monthly income exceeds your monthly expenses. If so, you may have too much “disposable income” to remain in Chapter 7. For most people seriously considering filing a Chapter 7 bankruptcy, eligibility is not a problem. However, the new Bankruptcy law that became effective on October 17, 2005, made significant changes governing an individual’s eligibility to file for Chapter 7 Bankruptcy relief.

The most important changes made to the Bankruptcy Code is the imposition of a “means test” to determine eligibility for Chapter 7, and a new requirement that a prospective debtor take an approved credit counseling course (from the list of credit counselors approved by the Office of the United States Trustee) and receive a credit counseling certificate prior to filing a bankruptcy case. This credit counseling course must have been completed within the 180 days preceding the date of the filing of the debtor’s bankruptcy and a certificate of credit counseling must be filed with the debtor’s initial bankruptcy filing. A list of approved credit counselors may be found at the Web site for the Office of the United States Trustee.

Additionally, certain income and expense limitations have been created by the new bankruptcy law in connection with eligibility for filing and continuing in a Chapter 7 case. Previous law allowed the bankruptcy court to review your actual income and expenses to determine if they were reasonable, or on the other hand, constituted a substantial abuse of the bankruptcy process for which your case could be dismissed. This has changed. Under the new bankruptcy law, eligibility to file is not based on actual or real income and expenses.

The “means test” created by the new bankruptcy law disregards your current actual income and expenses, and uses your average income received for the six months prior to filing and certain “allowable” expenses as defined by the Bankruptcy Code, to determine whether you are either eligible, or on the other hand, have too much “disposable income,” to file a Chapter 7 bankruptcy case.

Types of Debt

Unsecured debts, such as credit card debt, personal loans, money judgments and most tax liabilities can be discharged (eliminated) in a Chapter 7. However, certain debts are not dischargeable under Chapter 7 Bankruptcy; these debts include, but are not limited to, student loans, certain recent or fraudulent tax liabilities, alimony, child or other court ordered support payments, debts arising out of fraud, and other debts as specified in Section 523 of the Bankruptcy Code.

If a debt is secured by property, for example a home mortgage or car loan, then you have certain options that you can elect concerning how you pay or otherwise treat the obligation. For example, in most cases the bankruptcy law allows you to :

  1. keep your automobile and continue to pay the loan (as long as you are current and continue keep your payments current)
  2. "redeem" your automobile from you car lender by paying the "fair market value" of the car
  3. return the vehicle tom your lender in full satisfaction of the amount you owe

Under the new bankruptcy law, if you wish to retain your vehicle you are also required to “reaffirm” the debt by agreeing to make your future payment s and remain liable for any future payment deficiency. Reaffirmation of a debt means that you will continue to be personally liable for the debt even if you receive a discharge of your other debts from the bankruptcy court. Our attorneys will discuss whether you should “reaffirm” a debt, and your other options, before our firm files a Chapter 7 case on your behalf. Although the choice is yours, proper representation is important to know your options and make the right choice. Our firm keeps you in the "Driver's Seat". You make the decision, not your creditor.

If you live or work in Maryland or the District of Columbia and have questions about Chapter 7 Bankruptcy, the lawyers at Fried & Rosefelt, P.A. have the knowledge and experience to help you make the right decisions about your financial problems.
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