Chapter 7 bankruptcy, also known as liquidation bankruptcy, is the bankruptcy filing most often used because it can eliminate all or at least a significant amount of debt in a very short period of time. It is available to individuals and small businesses who cannot make regular monthly payments toward their debts. If you’re considering filing, you shouldn’t go about the bankruptcy process alone. Families, businesses, and individual clients come to the Dantzman Law office for relief from their serious financial problems.
To help you figure out if this is the best path for you, here are 4 things you should know before filing Chapter 7 bankruptcy.
1. Chapter 7 Bankruptcy Eliminates Most Forms of Debt
When you file for Chapter 7 bankruptcy, most, if not all, unsecured debts are erased. This means the debts are permanently forgiven, and you will be legally protected from the creditors ever trying to collect on debts that are successfully discharged. Typically this includes debts such as medical bills, credit card debt, personal loans, and in certain cases the underlying liability on secured debts. In certain cases, Chapter 7 can even discharge certain older tax liabilities and student loan debt. However, most tax debt, child support obligations, student loans, and certain other debts are not eligible for discharge, meaning they will survive bankruptcy. One of the things we will discuss with you is which debts we believe will be successfully discharged, and which debts we believe may survive the bankruptcy
2. The Stay Order Comes Into Effect
One of the major advantages of filing a petition under Chapter 7 is that it creates what’s called an “automatic stay.” This is one of the main protections given to someone who files for bankruptcy. An automatic stay, in its essence, is a legal “time out” that goes into effect the moment you file for bankruptcy protection.
As long as the stay is in effect, which is throughout the entire case, with limited exceptions creditors are prohibited from initiating or continuing lawsuits, wage garnishments, or even telephone calls demanding payments. The bankruptcy clerk serves notice of the bankruptcy automatic stay upon all your creditors
3. Filing Can Take As Long As Four to Six Months to Complete
Generally speaking, while the protections of filing bankruptcy are immediate in most cases, the entire Chapter 7 process from the initial filing of the case to the point when the court formally discharges your remaining debts takes about four to six months. But there are many important things that must happen at certain times in order to keep the process moving forward.
Here are the important steps for a typical Chapter 7 case that would be filed by an individual or married couple, where no assets are available for creditors:
- Client and attorney work to gather all of the necessary paperwork for preparing the Petition, Statement of Financial Affairs, Statement of Intent and Means Testing Forms to be filed with the Court.
- Attorney and Client review all of the paperwork together to verify accuracy and once the paperwork is signed by the client it is filed with the Court.
- Attorney and Client attend the 341 meeting of creditors hearing (typically about 30 -45 days after filing).
- Any additional documentation is provided for the trustee’s review.
- Client completes the financial management course certificate.
- Reaffirmation agreements with secured creditors, if applicable are completed
- Client receives the order, discharging (permanently forgiving) their debt.
- Successful closing of the bankruptcy case.
Dantzman & Dantzman will do our best to make this a straightforward and efficient process. In some cases there can be legal objections that could potentially delay this timeline:
- A creditor files an adversary proceeding objecting to the discharge.
- You want to discharge a student loan.
- Tardiness or noncompliance in getting the proper documentation to the trustee.
- A reaffirmation hearing is scheduled.
- The trustee files a motion to convert or dismiss the case because they believe the case was filed as presumptive abuse under the means test, in bad faith, or through fraud on the part of the debtor.
- The trustee believes the case has assets to liquidate to pay a dividend to your creditors
We’re Your Chapter 7 Bankruptcy Experts
Talking to an experienced bankruptcy attorney before filing your case can help you discover hidden dangers and avoid mistakes. Any mistakes made during the filing process can lead to your case being thrown out or not having some debts dismissed.
Dantzman & Dantzman Law Office provides quality, competent, personal bankruptcy attorney representation. We can help make what we know is an already difficult decision for our clients, into a smooth and efficient process as possible. If you are in need of help and are considering bankruptcy, please call. Contact Dantzman & Dantzman today.