Chapter 7 Bankruptcy
Most cases begin with with a phone call from an interested debtor. The initial call is a short conversation to get a lay of the land. We discuss why a debtor is seeking bankruptcy and big issues like foreclosure sale dates, garnishments, or repossessions pending. Once I determine that someone may be a good candidate for bankruptcy, then I will send a list of information and required documents to them to bring to our first meeting. The information and documents requested are aimed at providing proof of their financial life over the past 3 to 4 years. Here are some of the things I ask for:
1. All 3 credit reports
2. 6 months of pay stubs
3. 2 most recent tax returns
4. Title/Deed to everything you own
5. Most recent auto loan and mortgage statements
6. Completed intake questionnaire
Credit Counseling Certificate
Debtors are required to file a credit counseling certificate with an approved entity before the bankruptcy case is filed. Failure to obtain the counseling could result in dismissal of your case.
For more on this, go to my intake page.
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The chapter 7 bankruptcy case begins with the filing of a voluntary petition with the U.S. Bankruptcy Court for Maryland. The voluntary petition identifies the debtor(s), type of case being filed, and other information such as prior filings. The actual courthouse where you case is filed is determine by the the county where the individual or couple lives or where the business debtor is organized or has its principal place of business or principal assets.
As the marriage laws have changed, so has the rights of married debtors, regardless of sexual orientation, who are now eligible to file joint cases.
To complete the chapter 7 filing, the debtor also has to file the following:
(1) A disclosure of assets and liabilities known as schedules
(2) A Disclosure of current income and expenditures commonly known as schedule I and J.
(3) a statement of financial affairs
(4) a schedule of executory contracts and unexpired leases. Fed. R. Bankr. P. 1007(b).
(5) Means test form
The chapter 7 filing is $335.00 as of June 1, 2014. The filing fee can be paid in four (4) installments as long as a request is made to the court at the time of filing. 28 U.S.C. § 1930(a); Fed. R. Bankr. P. 1006(b); Bankruptcy Court Miscellaneous Fee Schedule, Item 8. The maximum number of installments payments allowed when paying the filing fee is four. The fee is due no later than 120 days after filing the petition. Fed. R. Bankr. P. 1006. If a debtor is unable to pay the filing fee on time, he or she can ask for the court for more time. Debtor must show a good reason why they should be granted more time and usually, the court will allow reasonable requests. If a debtor doesn’t pay, his or her case is dismissed.
For every chapter 7 case, a trustee is appointed by the Court to oversee the case. As a court appointed official, the trustee is there to ensure compliance with bankruptcy law and maximize recovery for your creditors.
Debtors must provide their trustee with a copy of most recent tax return or transcripts for the most recent tax year as well as any returns filed while the case is pending 11 U.S.C. § 521. In addition, the trustee will demand proof of income over the sixty (60) days prior to the filing of your case. Therefore, pay stubs, commission checks, and profit and loss statements must be submitted if applicable to your situation.
The schedules filed in the chapter 7 provide the court and your creditors the following information:
- A list of all creditors and the amount owed
- Debtor’s income
- Debtor’s assets
- List of exempt property
- Debtor’s monthly living expenses, from rent and food to entertainment.
If you have secured debts such as a car loans, you must file a statement of intent telling the creditor whether you intent to keep or surrender the asset. Most of my clients have car payments they keep.
Upon the filing of a chapter 7 bankruptcy petition, the automatic stay goes into effect and collection actions against the debtor or the debtor’s property must cease. 11 U.S.C. § 362. Although those outside of the bankruptcy world often do not know it, there is no additional court orders needed for the automatic stay to take effect. This can be a stubborn issue especially when a wage garnishment is in effect and employers unknowingly insist on the debtor obtaining a court order from the state courts before halting a garnishment. As long as the stay is in effect, creditors cannot initiate new collection activity.