Chapter 7 Bankruptcy

Also called the “liquidation” bankruptcy, Chapter 7 is the quickest and easiest form of bankruptcy. In three to six months, all of your qualifying debt can be eliminated.

Anyone can file Chapter 7 bankruptcy that lives in the United States or has property in the U.S. if they meet eligibility criteria. In order to qualify, you must pass the means test for your state. The means test is used to evaluate whether your income is at or below your state’s median income. Those who pass the means test may qualify for Chapter 7. If your income exceeds the median income of your state, you may be directed to file Chapter 13 bankruptcy instead.

Paperwork

In your initial bankruptcy filing petition, you will file a statement of your finances, your property, income, and expenses. A list of all your creditors and their addresses needs to be listed, and which debt(s) you intend to eliminate in bankruptcy. Your attorney will help you complete these forms and review whether some of your property meets exemption laws.

Automatic Stay

When you file your petition with the court, an automatic stay will immediately go into effect. Once an automatic stay has been filed, creditors are not allowed to contact you regarding your debt. All collection actions must stop, which includes foreclosures, evictions, utility shut-offs, and repossessions.

Trustee

Your court-appointed trustee is there for the interest of the creditors. The trustee will determine if you have any non-exempt property that can be sold to satisfy the creditors. The trustee will only sell items that exceed the limits of the exemption benefits. Most, if not all, of your assets will usually be covered under the exemption laws, helping you prevent the loss of your assets.
If the trustee does find something that falls under the non-exemption rules, you can contest the sale, or pay for the value of the item at that time and not the original sale value. Exemptions laws vary by state, and some states allow you to take the federal exemptions instead. Your bankruptcy lawyer will help you decide which exemptions will work best for your unique situation.

Meeting of the Creditors

The meeting of the creditors is usually held inside of the courthouse but outside of the courtroom. The trustee goes over your paperwork and will ask you some routine questions. You, and if you are filing jointly, your spouse must attend this meeting. Creditors rarely attend these meetings, but might attend if they are contesting the discharge. This meeting will last for about five to thirty minutes.

Discharge

If there are no objections to your case, the court will discharge your debt without a hearing. You will receive the order in the mail. You will no longer be legally responsible for the eligible debt you listed in your original paperwork.
If you have more questions about bankruptcy, contact a Sacramento bankruptcy attorney today.