Consumer Bankruptcy

For consumer Bankruptcy ( as opposed to business Bankruptcy Chapter 11 ) there are basically 2 Chapters of the Bankruptcy code available, Chapter 7 and Chapter 13.

A Chapter 7 Bankruptcy is the most common as it is a complete discharge of all of your debts with a few exceptions such as student loans  and tax liens which are not generally dischargeable( although there are certain limited exceptions regarding tax liens making some of them dischargeable ). Chapter 7 cases are typically cases in which the consumer does not have any non exempt assets that the Bankruptcy Trustee could collect  and use to distribute to the consumers creditors. The typical case is where a consumer has  a lot of credit card debt and other dischargeable debt and no assets ( typically does not own a house or if does own a house which is in foreclosure  and consumer is not going to try to save the house ) and desires a complete discharge of all debts and thus a fresh start with a clean slate.

A Chapter 13 bankruptcy is basically for consumers that do have non exempt assets such as a house and or expensive vehicles and they desire to keep those assets. Unlike a Chapter 7 Bankruptcy which as mentioned  is a complete discharge of all dischargeable debt, a Chapter 13 Bankruptcy is  one in which the debtor makes monthly payments to the Bankruptcy trustee , usually over a 5 year period according to a plan agreed upon by the Trustee, creditors  and the debtor. The amount of the payments is determined by how much assets and how much debt  the debtor has  and the ability  of the debtor to make the monthly payments. The percentage of debt that is paid back by the debtor to the trustee ( for the benefit of the creditors ) is determined by the factors mentioned in determining the amount of the payments. Some Chapter 13 cases may be “full payback” meaning the creditors will get paid back all they are owed but it will be spread out over a 5 year plan.If the debtor does not have enough assets to pay back in full, a lesser percentage is determined. For example if debtor has enough assets to pay back one half of what is owed this means each creditor will receive  one half of what is owed ( this would be known as a 50% plan ). As mentioned, the plan has to be agreed upon ( trustee confirms the plan  after a hearing ). Additionally the plan has to be feasible ( workable ), meaning the debtor must have the ability to make the payments during the life of the plan, or the trustee will not confirm the plan. If the plan is confirmed but the debtor is unable to make all of the payments  during the plan, the bankruptcy  will be dismissed and the debts will not be discharged.

The procedure for both chapters is substantially the same except that for a Chapter 13 there is more work to be done  and additional meetings before the trustee in regard to proposing a feasible plan and confirming the plan.  The typical procedure if you have an attorney is that you meet with the attorney and provide documentation  regarding your assets, debts, taxes to the attorney who then prepare a bankruptcy petition  for your review  and signature. If there are any changes to be made the attorney makes them and after  the petition is finalized  and signed, the attorney then files the petition electronically as well as providing a copy of the petition along with documentation to the assigned trustee and to the U.S. Trustee ( a different trustee than the assigned trustee, with the Department of Justice ). The Bankruptcy  Court emails the attorney with the case number  and  name and address of the assigned trustee and schedules a  meeting usually about 4 weeks after the filing. This meeting takes place at the Bankruptcy Court in a room full of other debtors . The meeting is recorded and when your case is called after presenting your Driver’s license ( or other photo ID) and your Social Security Card, you are sworn in and the trustee will ask you a series of questions, most of which can and should be answered with a yes or no or I do not know. Some questions may require further explanation by you  and/or your attorney and/or  may need further documentation to be provided . If there is further documentation required, the trustee will adjourn the meeting for  another date to provide the documentation. Usually the documentation can be sent by  mail and  no appearance is needed on the next date. If the trustee finishes his questions  and is satisfied with the answers and does not require any further documentation he will say ” meeting closed ” . This is the desired outcome.

There is nothing then for you to do except wait for the expiration of the required statutory period  of 6o days for any creditors to file objections ( rarely are  objections filed after the meeting if no creditor objected at the meeting  and the trustee closed the meeting ). If no one filed objections within the 60 days the trustee makes a report to the Bankruptcy Court recommending that all debts be discharged and the debtor is issued a Certificate of Discharge. The Bankruptcy Court will issue the certificate any time after the 60 days and after receipt of the trustees report, but usually this takes 1-2 or even 3 months depending on how busy the court is. Once you receive this certificate that is the conclusion of the case.

An additional requirement, effective as of 2005 by the Bankruptcy Reform Act, is that the debtor before  filing the bankruptcy petition, must take  a credit counselling course by an approved provider.  This course can be done over the internet or phone  and usually takes about 45 minutes and costs about $50. A Certificate of Completion is mailed to you  and emailed to your attorney who must file it with the Petition or the Petition will be dismissed. After the case is filed  and within 45 days after the  341 A meeting, there is  a requirement to take a Financial Management course approved by the Bankruptcy Court and it takes about the same time and costs about the same as the credit counselling course. A Certificate of Completion of this course also is issued  and must be filed  with the court.

After filing bankruptcy generally you can not file  another bankruptcy until after the expiration of 8 years.

The effect of filing a bankruptcy no longer carries the stigma it used to many years ago, nor does it have as much of a negative effect upon your credit rating as it used to. In fact  many debtors receive  offers of credit for loans for cars, house, credit cards ( many times from the same creditors whose debts you had  discharged in bankruptcy ) shortly after  being discharged from bankruptcy since they are willing to take a chance on you again ( and thus  making money from you again )  knowing that you cannot file bankruptcy to discharge their debt again for another 8 years.

I welcome any questions or comments about bankruptcy or about this blog article you may have. You may either post a comment or general question in the comment section or if you have a specific bankruptcy question pertaining to yourself you may send me a direct message to my email address which is edwarddowlingattorneyatlaw@yahoo.com.

Watch for more blog articles on areas of law, both Civil and Criminal.

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About edwardddowlingivattorneyatlaw

Established my General Practice Law Firm in 1991 Criminal and Civil Litigation Trials and Appeals Federal and State courts Nassau and Suffolk Counties All 5 boroughs of NYC
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