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CHAPTER 7 BANKRUPTCY

A decision made to file for bankruptcy should be made only after determining that bankruptcy is the best way to deal with your financial problems. This introduction cannot explain every aspect of the bankruptcy process. If you still have questions after reading this, you should speak with an attorney familiar with bankruptcy.

 

WHAT IS CHAPTER & BANKRUPTCY?

A Chapter 7 bankruptcy is a legal proceeding whereby an individual (known as “the debtor”) files a petition in Federal Court requesting that some or all of his debt be forgiven (“discharged”).

SHOULD I FILE A CHAPTER 7 BANKRUPTCY?

You may need to file a Chapter 7 bankruptcy if you do not have enough income to pay your ongoing expenses (rent or house payment; utilities; food; insurance; etc.) and your debt (credit cards; medical bills; etc.) on time.

DO I QUALIFY FOR A CHAPTER 7?

The main requirement for eligibility for a Chapter 7 bankruptcy is, obviously, the amount of your income. If you make “too much income” you may not qualify for a Chapter 7. (In that case, you may need to file a Chapter 13). If your income is average or below average you will likely qualify for a Chapter 7. If your income is “above-average”, you may still qualify for a Chapter 7 is you pass the Means Test.

WHAT IS THE MEANS TEST?

The Means Test is a mathematical calculation. The amount of your average monthly expenses are subtracted from your average monthly income (for the previous 6 months). If the result is close to $0.00 or less, you should qualify for a Chapter 7. If the calculation indicates that you have “excess income”, you may need to file a Chapter 13.

 

IF I FILE A CHAPTER 7 BANKRUPTCY, DO I LOSE MY PROPERTY?

Most people who file bankruptcy do not lose any of their property. When you file a Chapter 7 bankruptcy, you are entitled to “exempt” a certain amount of property. If you can exempt property, that means that the Chapter 7 Trustee is not able to take your property. Each state has different exemption laws. A partial list of Missouri and Kansas exemptions are available at the following links:

 

MISSOURI EXEMPTIONS

KANSAS EXEMPTIONS

Your bankruptcy attorney will discuss your exemptions with your prior to filing your Chapter 7 case. If you have property that is not-exempt and you don’t want to lose it, you may instead want to file a Chapter 13.

 

COMMON ISSUES CONCERNING EXEMPTONS:

HOMESTEAD EXEMPTION: In Missouri, if the house you are living in has much more than $15,000.00 equity in it, you may have to surrender the house in your Chapter 7 case. In Kansas, you should be able to exempt (keep) your residence, no matter what the value.

VEHICLE EXEMPTION: In Missouri, if your vehicle has much more than $3,000.00 equity in it, you may have to surrender your vehicle in your Chapter 7 case. In Kansas, as long as your vehicle has less than $20,000.00 equity in it, you should be able to keep your vehicle.

MONEY IN THE BANK: When you file your Chapter 7 case, you will likely not want to have much money in your bank accounts or cash on hand. It is possible that you may be required to turnover to the Trustee any significant amount of funds that were in your bank accounts on the date you filed your Chapter 7 case.

TAX REFUNDS: If you will receive a tax refund for the current tax year or from any prior tax year after you file your Chapter 7 case, you may be required to turnover to the Trustee and such tax refunds you receive.

WHAT KIND OF DOCUMENTS WILL I NEED TO FILE A BANKRUPTCY?

Whether you file a Chapter 7 or a Chapter 13 bankruptcy, you will need to provide your attorney, the Trustee and the Court a number of documents, including: Copies of pay-stubs or other proof of income for the previous 6 months Copies of your tax returns for the previous two years Copies of Titles to your vehicles Copies of the Recorded Deed of Trust for any Real Estate Copy of your recent credit report List of your creditors List of your ongoing expenses (Budget) List of your assets

WHO IS THE BANKRUPTCY TRUSTEE?

After you file your Chapter 7 case, an individual known as the Trustee will be appointed to your case. He will review the documents you file with the Court to determine if you qualify for a Chapter 7 Discharge and if you have any non-exempt assets that he wants to administer (take).

 

WHAT IS A SECTION 341 HEARING (ALSO KNOWN AS A MEETING OF CREDITORS)?

For the vast majority of Chapter 7 filers, there is only one hearing that they have to attend. It is called Meeting of Creditors, but in my experience, 98% of the time (or more) creditors do not attend the hearing. At your hearing, the Trustee will put you under oath and ask you if all the documents you filed with the Court are true and correct and complete. The Trustee may also ask you to clarify or provide additional information. Your attorney should be with you at your hearing to assist you.

WHAT IS A CHAPTER 7 DISCHARGE ORDER?

A Discharge Order is the goal of a Chapter 7 case. A Discharge Order is an Order entered by the United States Bankruptcy Court that means that all of your dischargeable debts are no longer collectable. Common examples of debts that are not discharged: most taxes and student loans; and debts that you agreed to “reaffirm” (like car loans). Your bankruptcy attorney will explain to you which of your debts will be dischargeable, and which you will still be responsible to pay. In most cases you will receive your Chapter 7 Discharge Order about three to four months after you filed your Chapter 7 case.

The law often changes. Each case is different. This introduction is meant to give you general information and not meant to give you specific legal advice.

The information on this web site is of a general nature only. The information presented on this site should not be construed to be formal legal advice nor the formation of a lawyer/client relationship.

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