The Chapter 7 Bankruptcy Process

Chapter 7 personal bankruptcy is also known as the liquidation bankruptcy. This type of bankruptcy liquidates all of your unsecured debts without a repayment plan. You must forfeit all of your nonexempt property to the trustee so the assets can be sold and the money distributed to your creditors. The exemptions are pretty generous, so most people do not lose any assets in Chapter 7 bankruptcy.

Secured loans will not be discharged under Chapter 7 bankruptcy. If you have secured debt such as homes are cars, you can choose to give up these assets and have the debt discharged.

Talking to a qualified attorney will ensure you are getting the best representation in your bankruptcy case. The laws and rules of bankruptcy can be complicated. You don’t want to save money on hiring a lawyer only to lose valuable assets or have your case dismissed because you filed the wrong paperwork, missed a deadline or meeting.

Finances

When you are starting the bankruptcy process, you should study your current financial situation to determine the best Chapter in the bankruptcy code you should be filing. Your average monthly income, and expenses, and what your future financial goals are.

Analyzing your finances will help you choose which type of bankruptcy to file. If you and your bankruptcy attorney decide to file Chapter 7, you will want to find out if your state or federal exemptions will allow you to keep the most assets.

Means Test

Since in Chapter 7 bankruptcy allows you to wipe away all of your credit card and unsecured debt, laws were put in place to protect the creditors.

In 2005 the Bankruptcy Abuse Prevention and Consumer Protection Act was enacted. Part of this new law was to create the means test. The test uses your states median income and compares it to your monthly expenses and bills. Essentially if you have enough extra income, you will not be able to file Chapter 7 and will be directed to Chapter 13 repayment bankruptcy instead.

Credit Counseling Course

The bankruptcy law requires all filers to complete an approved credit counseling course before they can file for bankruptcy. These courses offer alternatives to bankruptcy that you may not have tried or considered. Of course, if you are at the stage of filing for bankruptcy, these other options may not be of value to you. You can find approved providers by going to U.S. Justice Department website.

Filing your Paperwork

When you file your bankruptcy petition with the court, the legal portion begins at that time. The automatic stay goes into effect immediately, preventing creditors from contacting you to collect on your debt. All creditors actions such as wage garnishments, liens, repossessions, and lawsuits must stop.

The 341 Meeting

The 341 meeting is a meeting of your creditors that will take place approximately 30 days after you file your bankruptcy papers with the court. You and your attorney will attend this meeting with a court-appointed trustee. The trustee will go over your paperwork and ask you questions regarding your income and debts.

Debtors Education Course

Before you can have your bankruptcy completed, you must attend a pre-discharge debtors education course. This course will teach you better financial habits and how to manage your finances in the future. For a list of approved online courses go to the DECAF Debt-foundation.org.
Discharge

After the trustee liquidates your nonexempt assets and distributes the proceeds to your unsecured creditors, the bankruptcy judge will discharge any remaining qualifying debt, and your bankruptcy is complete.

Speaking to a Dallas bankruptcy attorney will help you decide what type of bankruptcy is best for you.