Planning for the Chapter 7 bankruptcy The move to file bankruptcy should be a once-in-a-lifetime decision. Careful planning can save both your personal and real property. Hasty filing can be costly. Once you've decided to file for bankruptcy protection there are many ways to plan the filing to maximize asset protection. The Chapter 7 "Liquidation" Chapter 7 is designed for individuals who wish to make a "fresh start." A person who files for bankruptcy protection is called the "Debtor." The Chapter 7 case begins with the filing of a bankruptcy petition. The debtor is permitted to keep (exempt) certain property. The remaining (nonexempt) property is turned over to a court-appointed trustee, who then converts the nonexempt property to cash and pays the creditors. If all of the debtor's assets are exempt, there will be no distribution to creditors. In return, the debtor receives a "discharge" which excuses the debtor's obligation to pay the debts listed in the bankruptcy petition. A debtor may receive a Chapter 7 discharge only once every six years. Non-dischargeable debts All debts of any kind or amount are dischargeable under Chapter 7 except: Debts for certain taxes, including taxes that became due within the last three years; Debts for obtaining money, property, services, or credit by means of false pretenses, fraud, or a false financial statement (included here are certain debts for luxury goods or services and for cash advances made within 60 days of the filing of the case and up to $1,000); For fraud, embezzlement or larceny; for intentional or malicious injury to the person or property of a creditor; Debts for alimony, maintenance and support, with certain very limited exceptions; Debts for government fines and/or penalties; Debts for educational benefits and student loans; Debts for death or personal injury caused by the operation of a motor vehicle while unlawfully intoxicated; The fees The filing fee is $200.00. The fees for the preparation of a bankruptcy petition, consultation and attendance at a 341 (a) meeting of creditors varies greatly among professionals. Many circumstances impact these fees. Husband and wife filing jointly A husband and wife may file jointly under chapter 7. If a joint petition is filed, only one set of bankruptcy forms is needed and only one filing fee is charged. Since California is a Community Property state, the debts incurred by either spouse during a marriage are the responsibility of both spouses. The timing of the filing When all anticipated debts have been incurred. When the debtor has converted nonexempt assets into exempt assets. When all non-exempt property has been received, be alert to timing if property is to be acquired through inheritance, life insurance or divorce within 180 days of the filing. To thwart a hostile creditor who threatens legal action or attachment on assets or future income. To forestall a foreclosure action against the residence. More than 60 days from the last cash advance against a credit card. The Automatic Stay Stops all debt collection, (except as in the case of child support or alimony). The stay is terminated when the creditor files a motion with the court, a hearing is held and the creditor is granted relief. This usually occurs when either real property or an automobile is involved or pending litigation. Your credit rating after filing The bankruptcy is reported to all credit agencies and remains on your credit report for 10 years. It is an exchange for the relief that you get for the discharging of your debts; the saving of your home; the protection of your assets; and getting your fresh start. Publication of the filing When a chapter 7 case is filed it becomes public record. The filing is reported to the credit agencies. However, newspapers do not usually report or publish the names of consumers who file for bankruptcy. Business filings are reported. Notification of employers Employers are not notified when a bankruptcy is filed. You cannot lose your job simply because you filed for bankruptcy. The bankruptcy procedure The first appearance by the debtor is at the "ä341(a) meeting of creditors" which usually takes place about 5-to-6 weeks after the bankruptcy case is filed. You and your creditors are notified by the bankruptcy court as to the time and date. The discharge may be received as soon as 4 months from the initial filing. The exempt assets All property of the debtor, real or personal, are included in the bankruptcy estate. The Bankruptcy Code provides for an individual debtor to exempt certain property, giving the debtor a "fresh start." Thus, exempt property is the property the debtor may keep during and after bankruptcy. Dealing with a utility company If a utility company is a creditor, the debtor, within 20 days from the filing of the petition, furnishes the utility company with a deposit or other security to insure the payment of future utility services. It is illegal for a utility company to discriminate against the debtor. The impact of the bankruptcy on cosigners A discharge is only for the debtor. There is no "co-debtor" stay. This means that if there is another person obligated on the debt the creditor can continue to pursue that other person for payment of the debt. See chapter 13 for a co-debtor stay. |
|
881 Alma Real,
Suite 309, ©
N Jane DuBovy 2001-2009 All Rights Reserved. |