Overview of Consumer Bankruptcy – Part I of II

What is Chapter 7?

It is the most common type of consumer bankruptcy.

Why would I file?

A Chapter 7 bankruptcy is filed in order to eliminate your obligation to pay your creditors: credit cards, pay-day loans, medical bills of all kinds, balances still due on repossessed automobile loans or foreclosed mortgages, etc., etc.

How is it started?

A petition needs to be prepared and filed with the Clerk of the U.S. Bankruptcy Court. Your lawyer will prepare the petition. The petition contains a great deal of  financial information about you, including but not limited to: a list of creditors, a list of assets, a budget, answers to a series of financial questions and the Median Income Test. Preparing the petition requires the accumulation of many documents, among other things: copies of bills, collection letters, loan statements, law suits filed against you, tax returns pay stubs, etc., etc.

What happens after the Petition is filed?

As soon as your petition is filed, you are now protected against your creditors. Telephone calls must stop, nasty collection letters must stop, lawsuits cannot be started or continued, wage garnishments cannot be started or continued.

Meeting with the Trustee

Four to eight weeks after filing, you will have a meeting with the bankruptcy trustee that is assigned to your case. This is not a court appearance; it is simply a meeting and is generally much easier than you can possibly imagine and quite painless. The purpose of the meeting is to verify that you will be allowed to keep those things that you own that you want to keep, whether bank accounts, vehicles, real estate, furniture, etc. Very few people who file Chapter 7 have anything taken from them. (A reason to file the other type of consumer bankruptcy,  Chapter 13,  is to keep an asset that is worth too much money. If your uncle gave you a brand new automobile six months ago, and you came to see me to file a Chapter 7 to get rid of $50,000.00 worth of credit card debt and medical bills, I would tell you that you need to file a Chapter 13 and repay some of your debt to keep that car; that if you filed a Chapter 7, your car would be sold by the trustee.)

What happens after the meeting? You will soon have no more debt!

Just about 4 months after your petition has been filed,  you will receive a document  called “Order of Discharge”.  The Order of Discharge is the document that officially eliminates, forever, your legal obligation to pay the creditors that you owed at the time you filed your Chapter 7 petition.  Your case will not take 2 months, nor will it take 8 months; just about 4 months after it has been filed is when you will receive your discharge. Chapter 7 bankruptcy is the only legal process that I know of where you know how long it will take and what will happen.

How Do I Know If I Should File?

Are you making just minimum payments on your credit cards? Do those credit card balances never get smaller? Are collection agencies calling you? Have you been summonsed to court?  These are all signs that a bankruptcy may be of great value to you.

Contact a local experienced bankruptcy attorney for advice. The initial consultation is free at any of our six offices; many bankruptcy attorneys also offer a free initial consultation. Don’t be afraid to disclose everything requested about your finances. Honest people who qualify for Chapter 7 receive a discharge of their debts.

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