Katz and Wulff Attorneys at Law

Chapter 7 Bankruptcy

Often when considering bankruptcy, people are afraid that filing will involve a confrontation with creditors, being ridiculed or having property loaded onto a truck and hauled away. This frightful image is about as far from the truth as it could be. Here’s how it works:

• We will file your petition with the court, together with schedules, statements and exhibits that show, among other things, what you own and what you owe.
• The bankruptcy court will assign a trustee to your case, and will send notice to all of your creditors telling them that you filed bankruptcy, where you filed, what kind of case you filed and the date, time and place of something called a “Meeting of Creditors”. The Meeting of Creditors is usually held about six weeks after the bankruptcy petition is filed.
• You must go to the Meeting of Creditors, at which time the trustee will review your petition and ask you questions to make sure that the papers you filed truthfully, correctly and fully explain in detail your financial situation. You will have your attorney there with you to explain the process and answer any questions you may have. Creditors may also go to this meeting to ask questions of you, but very few of them choose to do so.
• If you choose to surrender collateral to a creditor, such as a car or house, the creditor will usually contact you to arrange for its return.  If you choose to keep collateral and continue to pay for it, you will sign a “reaffirmation agreement” – an agreement with the creditor that has the effect of waiving the discharge as to that creditor. You will then be allowed to keep the collateral by continuing to make payments on the original debt.
• About three months after filing the Chapter 7 bankruptcy petition, if no creditors object to the discharge (a very rare occurrence which usually takes place only in instances of fraud), the Court issues an order discharging, or canceling your debts.

What Are the Limits of a Chapter 7 Bankruptcy?

The goal in any bankruptcy, whether it is filed under Chapter 7 or Chapter 13, is to receive a “discharge”. A discharge is a court order releasing you of your obligation to pay most or all of your debts. The discharge will normally include bills such as credit cards, medical bills, utility arrearages, and other similar debts.

There are limits, however, to what a Chapter 7 bankruptcy can do. For instance, a Chapter 7 bankruptcy WILL NOT:

• Permanently stop foreclosure on your house or mobile home. (A Chapter 7 will, however, allow you to surrender the property voluntarily without further obligation.)
• Keep your car and other property or force the return of repossessed property. (You may be able to “reaffirm” debts in Chapter 7 which would allow you to keep these items. However, if you are behind in payments on any of these items “reaffirmation” is probably not an option and creditors will be entitled to repossess or keep this property.)