Chapter 7 Bankruptcy

Filing Chapter 7

Filing Chapter 7 serves you in several ways. First, as soon as the case is filed, all of your creditors are stopped from doing anything toward debt collection. They cannot call or write to you demanding payment. They cannot start or continue any lawsuits against you, and foreclosures and repossession procedures are at least temporarily halted. Second, filing Chapter 7 will discharge or relieve you of the obligation of paying your unsecured debts, those debts which don’t have a collateral, such as credit card debts, signature loans and medical bills.

Secured debts, those debts with a collateral such as homes, vehicles, and major appliances, must be paid if you wish to keep the collateral. So, if you want to keep your home and your vehicles, you must continue to make your monthly payments. If you do not want to keep the collateral, you may give it back to the creditor, and the debt becomes unsecured and will be discharged.

This section addresses most of the questions our clients have when they are thinking about filing a Chapter 7 bankruptcy. The Chapter 7 process can be summarized into ten stages. The stages are:

Office Consultation

The initial office consultation is free of charge. This consultation is handled by an attorney who is experienced, who understands, and whose only area of law is BANKRUPTCY LAW.

The purpose of the office consultation is to analyze your legal and financial situation; therefore, IT IS OF THE UTMOST IMPORTANCE THAT ONLY AN INDIVIDUAL WHO IS A LICENSED ATTORNEY GIVE YOU LEGAL ADVICE AND RECOMMEND WHETHER OR NOT YOU SHOULD FILE FOR BANKRUPTCY. Also, the changes made to the Bankruptcy Code in 2005, make it imperative that only an attorney, whose primary area of practice is bankruptcy law, advise you on the impact of the “Means Test” and the choice of exemption laws.

In order for the office consultation to go smoothly, complete the Customer Information Sheet and bring it with you to your appointment. Call our office for an appointment or request one by e-mailing us at john@johndavislawfirm.com

Retaining the Firm

The fee for the handling of your Chapter 7 case will depend on the complexity of your situation. During your free in office consultation, you will be advised of the fee associated with the handling of your case

When you pay the initial retainer, within 24 hours we will input your basic information into our system. From that date and on, you may refer to us any creditor who contacts you. Generally, referred creditors will contact us to verify that you have retained our law firm. Even though not required by law, most referred creditors will stop contacting you for 30 to 60 days.

In order to retain our law firm you must pay the initial retainer amount quoted at your free consulatation and sign a legal services agreement.

Credit Counseling

As part of the changes made to the Bankruptcy Code in 2005, every individual who wishes to file a Chapter 7 bankruptcy must attend a Credit Counseling session within 180 days before filing bankruptcy. Once the session is completed the individual will be issued a certificate of attendance which must be filed with the bankruptcy court at the time that the Chapter 7 case gets filed.

The Credit Counseling session may be attended in person, via telephone or via internet. The fee that each approved provider charges varies between $30 and $60.

Here, we have provided links to the web sites of a few approved credit counseling organizations.

Preparation of Legal Documents

Your bankruptcy paperwork is prepared from the information which you provide in our questionnaire. Our questionnaire must be fully and accurately completed. The questionnaire itself is somewhat intimidating by its length, but quite a few of the questions may require an answer of “no, none, or not applicable (n/a)”. It is important to remember that EACH of the blanks in the questionnaire must have an answer because each blank in the questionnaire relates to a required disclosure in the legal documents we will prepare on your behalf. Even if one blank in the questionnaire remains unanswered, we may not be able to complete your legal paperwork, which in turn, will lead to unnecessary delay in filing of your case.

We are often asked if a person can include in the bankruptcy paperwork only those creditors that the person wants included, leaving all other creditors out of the paperwork. All creditors must be listed, even the creditors you intend to pay. However, you do not have to list credit cards with zero balances because you do not owe them anything and they are not your creditors. If you want to keep a major credit card active after filing bankruptcy, you may pay it off prior to filing your case and not list it in the questionnaire so long as the pay off amount within 90 days of the filing of your bankruptcy case is $600 or less. Even if you pay off a credit card before filing bankruptcy, it is possible that the card issuer may find out about your bankruptcy and cancel your card.

The legal documents we will file on your behalf are:
1. A statistical coversheet.
2. The Bankruptcy Petition (invokes the automatic stay which stops your creditors from further contact or collection action).
3. A summary of the different chapters available under the Bankruptcy Code.
4. A statement of the attorney’s fees you agreed to pay to our law firm.
5. A list of your real estate.
6. A list of your personal property.
7. A list of your exempt property.
8. Details about your monthly income.
9. Details about your monthly expenses.
10. Statement of Financial Affairs (this gives your creditors information about different apscets of your financial life covering a period of two years).
11. A statement of your intentions with respect to those assets that you owe money on (For example, whether you intend to keep or surrender your home or your vehicles).
12. A summary of your assets and liabilities.
13. A verification of the names and addresses of your creditors.
14. A verification of you Social Security Number.
15. Credit Counseling Certificate.
16. Pay stubs covering the 60 days before the date of the filing of the bankruptcy.
17. The Means Test.

These documents are developed from the information you provide in the questionnaire

Filing the Case

Once you have paid the agreed upon fee, including the filing fee, and have signed and dated your bankruptcy paperwork, your paperwork will be ready for filing with the Bankruptcy Court. You will be advised of your date of filing at the time of the signing of the bankruptcy paperwork. You may call us the day after your case is filed to receive your bankruptcy case number. Every employee of our law firm is capable of providing this information once it is available.

After your Chapter 7 case is filed with the Bankruptcy Court, a copy of your bankruptcy paperwork will be mailed to you for your record.

As soon as your case is filed, the automatic stay comes into effect. From this point forward, if any creditor contacts you, give them our law firm’s name and phone number, and your bankruptcy case number. On rare instances, a creditor may contact you after you have given them your bankruptcy case number. If this happens, make a short memo of who contacted you, what was said, and when the conversation occurred. Mail a copy of your memo along with your full name and case number to our firm and we will handle it from there.

The Automatic Stay

As soon as your case is filed, a temporary bankruptcy court injunction known as the “automatic stay“ comes into effect. The automatic stay stops all of your creditors, including the IRS, from debt collection. Your creditors cannot call or write to you demanding payment. They cannot start or continue any lawsuits against you, and foreclosures and repossessions are, at least temporarily, stopped.

After your Chapter 7 case is filed, on rare instances, a creditor may contact you more than once. If this happens, make a short memo of who contacted you, what was said, and when the conversation occurred. Mail a copy of your memo along with your full name and case number to our law firm and we will handle it from there.

Meeting of Creditors

Generally, between 20 to 40 days after your Chapter 7 case is filed, you will have to attend a meeting that is mandatory and is known as the “Meeting of Creditors.” Any creditor who wishes to ask you questions about your financial situation, may show up at the meeting and ask you questions. In the vast majority of cases, no creditors attend the meeting. As a general rule, the only creditors who appear are either creditors who are unfamiliar with the bankruptcy process and think they must appear or creditors which have a lien on major appliances or furniture which you might have purchased. For example, if you have purchased a washing machine from Sears, the Sears representative may attend the meeting. Creditors’ representatives are NOT there to argue, confront, or embarrass you, and will not engage in such conduct.

Both the bankruptcy court and our firm will inform you in writing of the exact date and time of the meeting of creditors. Our notice will also include a map to the building.

The meeting of creditors is held at the Fritz G. Lanham Federal Building in a meeting room, not a courtroom. Only in very rare instances will a Chapter 7 client have to actually go to a hearing in the courtroom.

The Federal Building is located at 819 Taylor Street, Fort Worth in Room 7A24 (seventh floor) Fort Worth, Texas 76102 – Corner of 10th and Taylor Streets. Click here for map

Several meetings are scheduled at, or about, the same time, so there will be other clients present during the meeting. If possible, you may want to show up early to see how the meetings are conducted and to assure yourself that there is very little with which to be concerned. If you are filing the case as a joint case with a spouse, both of you MUST attend the meeting.

The meeting will be conducted by a trustee whose primary job, (aside from conducting the meeting) is to collect any non-exempt assets that you may own. Since almost all cases do not have such assets, the meeting is rather short. It lasts about fifteen minutes.

When it is time for your meeting, the trustee will call your name and you along with an attoreny from our law firm will sit at the table in front of the trustee. The trustee will swear you in. The firm’s attorney will then ask you whether the information contained in your bankruptcy documents are true and accurate to the best of your knowledge and if there are any changes that need to be made. If there are any changes to the documents that need to be made, we will simply tell the trustee. For example, you may have had a change of employment or address.

The trustee often asks you to explain the circumstances that prompted you to file your case. The trustee and attending creditors, if any, may ask you questions about information in your bankruptcy paperwork. Usually, the inquiries are kept brief due to the volume of cases scheduled. In some cases, the trustee or a creditor may ask you to provide additional information, or may want to depose you at length; however, these circumstances are very rare. If they occur in your case, we will consult with you at length about your situation. After you answer the trustee’s questions, the meeting will adjourn and you will be free to leave.

Personal Financial Management Class

As part of the changes made to the Bankruptcy Code in 2005, every individual who files a Chapter 7 bankruptcy case must attend a Personal Financial Management Class within 45 days of the Meeting of Creditors. Once the class is completed the individual will be issued a certificate of attendance which must be filed with the bankruptcy court. Unless you complete a Personal Financial Managment Class, you will not receive a discharge. In fact, failure to attend a class may lead to the dismissal of your bankruptcy case.

On our web site we have provided links for those entities that are approved for providing such a class. The Texas A&M University System, provides its course free of charge.

Texas Cooperative Extension of the Texas A&M University System
Dr. Joyce Cavanagh
2251 TAMU
College Station, TX 77843-2251
979-845-3859
bankruptcy.tamu.edu
Type of Services: In Person

Reaffirmation Process

If you wish to honor a debt to a specific creditor by paying it back in full, it is said that you intend to reaffirm your debt to that creditor. The Reaffirmation Process is completely voluntary and it cannot take place unless both you and the creditor agree to the reaffirmation. The reaffirmation of a debt prevents that debt from being discharged or wiped out in your bankruptcy. Therefore, you must rarely, if ever, reaffirm debts unless absolutely necessary. The process works this way:
1. The creditors prepare and send the reaffirmation agreements to us. The creditors prepare the reaffirmation agreements because the vital information such as the debt amount, the amount of unpaid accrued interest, the interest rate, the monthly payment, etc., are maintained in most creditors’ ordinary course of business, and these kinds of information are accessable to them easily and quickly. Also, unless the creditor wishes to enter into a reaffirmation agreement it cannot be forced to do so.

2. Once we receive a reaffirmation agreement from a creditor, we will forward it to you with our recommendation as to whether you should or should not reaffirm the debt.

3. You will review the reaffirmation agreement, make sure that you agree with the accuracy of the dollar figures and its terms. If you do not wish to reaffirm, you will just keep the reafirmation agreement for your record. If you wish to reaffirm, you will fill in the blanks where needed, sign the reaffirmation agreement, and mail it back to us.

4. If we determine that the reaffirmation of the debt will not impose ”undue hardship” on you or your dependents, we will sign the reaffirmation agreement and will forward it to the creditor. Then, the creditor will file the reaffirmation agreement with the bankruptcy court. However, if we determine that the reaffirmation agreement will cause you or your dependents “undue hardship,” we will refuse to sign the reaffirmation agreement. Without our signature, the only way a debt can be reaffirmed is if the bankruptcy court determines that reaffirmation is proper under the circumstances.

Discharge

Generally, the Bankruptcy Court will enter a discharge order in your case about 3 months after the Meeting of Creditors. The discharge order relieves you of the obligation of repaying the unsecured debts you listed in your bankruptcy paperwork as well as any deficiency claim which may come about from surrendering homes, cars, etc. The discharge order is a permanent injunction against the mentioned creditors preventing them from collecting on their claims.

When you get the discharge order:
1. Keep it with your other legal documents such as your will or car titles. If a creditor tries to collect on a discharged debt, forward a copy of the discharge order to the creditor and that should stop the collection action.

2. Please note that only debts that you incurred before the filing of your Chapter 7 case are dischargeable. Any debt, including rent, association fees, utilities, or other services, incurred after the filing of your Chapter 7 case are not discharged.

3. Once you file a Chapter 7 case and receive a discharge, you will not be eligible for another Chapter 7 discharge unless eights years have passed from the date of the filing of the first Chapter 7 case.

There are several types of debts which will not be discharged or relieved through a Chapter 7 bankruptcy. These include but are not limited to:

• debts for federal income taxes that counting backwards from the date of the filing of the bankruptcy (a) the returns for which have been due for less than three years, (b) have been assessed within 240 days, or (c) the returns for which have been on file less than two years or have not been filed at all.
• debts associated with filing a fraudulent income tax return.
• debts for “trust fund” taxes, such as employment withholding tax, sales tax, etc.
• debts for domestic support obligations such as child support, spousal support and alimony.
• debts to governmental units for fines, penalties or restitution.
• student loans and their consolidation.
• debts that came about for operating a motor vehicle, boat or airplane while under influence.
• debts for property settlement reached in a divorce or separation agreement.

There are several types of debts which may end up not getting discharged or relieved through a Chapter 7 bankruptcy. These include but are not limited to:

• debts for fraud, false misrepresenatation or false pretenses.
• debts of more than $500 for “luxuary goods and services,” incurred within 90 days or less before filing bankruptcy.
• debts of more than $750 for “cash advnaces,” incurred within 70 days or less before filing bankruptcy.
• debts which were not listed in the bankruptcy paperwork.
• debts for violation of fiduciary duty, embezzlement or larceny.
•debts that are the result of intentionally injuring another individual or property of another.