In general, people see bankruptcy as a last resort when an event has occurred that substantially disrupts their personal and financial life. Often a divorce, loss of a job, the struggle to obtain a new job, or a death in the family can lead a person to seek relief in bankruptcy. Whatever your reason for choosing bankruptcy, you should be equipped with general knowledge to make the process simpler. Of course, the best way to ensure a smooth bankruptcy process is to hire a qualified and competent attorney to represent your interests during the bankruptcy. We are such attorneys and we can certainly help you navigate the complicated process of bankruptcy. If you are considering filing for bankruptcy, this post will help you understand some of the terms and requirements for filing a chapter 7 bankruptcy. For individual debtors, the first choice is whether to file a chapter 7 or 13 petition. Sometimes, however, that is not a choice because of the debtor’s income. But for the sake of clarity, this post will focus on chapter 7 only.
The debtor initiates most consumer bankruptcies voluntarily. Depending upon the number of creditors you have and the amounts owed to those creditors, you should be aware that the Bankruptcy Code allows for involuntary petitions as well. If you are served with an involuntary bankruptcy petition for any reason, you should immediately contact an attorney. When you file a bankruptcy petition, the court imposes what is called an automatic stay. Basically, the stay protects you from further collection efforts by your creditors. From the moment you file for bankruptcy, creditors are no longer allowed to seek collection from you, threaten you with legal proceedings, or actually file those legal proceedings against you and obtain a judgment. The stay is subject to various exceptions and we can discuss in more the detail the coverage of the automatic stay when you visit for a consultation.
When you file a bankruptcy petition, you will also have a duty to provide additional documentation about your finances. This includes, but is not limited to, a list of your creditors, a list of the current assets you own, and information about your current income and expenses. Your attorney can help you gather and prepare this information. When you speak with your attorney about this information, it is extremely important that you are honest and forthcoming. Failing to disclose a creditor or the amount of money you earn can result in serious consequences during your bankruptcy case, including the possibility of dismissal. You will incur a filing fee of $75 when you file a chapter 7 petition. Additionally, as an individual debtor, you must attend available credit counseling at least 180 days prior to filing for bankruptcy. These courses can be accessed in an online format. Failure to complete this course could result in substantial consequences.
In a chapter 7 case, the court will appoint a trustee to manage your assets and perform other administrative functions on behalf of the bankruptcy estate. This includes determining your eligibility for chapter 7 relief. All debtors that file under chapter 7 are required to submit to a means test. The means test determines your eligibility to continue with the chapter 7 case. It is a complicated mathematical calculation that compares your income and expenses with statutory guidelines. If you pass the means test, you can continue your case as a chapter 7 debtor. If you fail the means test, however, the court presumes that continuation of your case under chapter 7 is an abuse and will require that you either convert your case to chapter 13 or dismiss the case altogether.
If you are able to continue your case under chapter 7, the trustee will gather all of your non-exempt assets for liquidation. Texas allows for generous exemptions regarding real and personal property. Once your non-exempt assets are liquidated, the proceeds are distributed to your creditors according to a statutory scheme for priority. After this occurs, you will receive a discharge and will not maintain any personal liability for the debts discharged. At this point, you should work with your attorney to understand the next steps after bankruptcy. Follow up with your attorney to work out a plan for securing your financial future. There are other rules applicable to debtors who receive a chapter 7 discharge and who want to file again. To avoid dismissal under these rules, work with your attorney to avoid bankruptcy in the future.
If you are considering bankruptcy, give us a call. We can help you with the process. We will keep you informed and aware of everything that occurs. If you have any questions, we can get you the appropriate answer.
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