Once you have made the decision to file for Chapter 7 Bankruptcy, you will be required to take a few steps to get your case filed.
Make a List of Your Debt
First, you’ll need to make a list of all your debts. This debt list should include the name and address of each creditor, the approximate balance owed, and (if possible) the last 4 digits of each account. We always pull a tri-merge credit report for our clients prior to filing the case since it’s difficult or impossible to obtain all this information accurately and thoroughly from memory and household records. Keep in mind that some debts, such as alimony, child support, student loans, and certain tax debts, are not dischargeable in Chapter 7 Bankruptcy, but must still be disclosed in your bankruptcy schedules. It’s important to include all your debt in your bankruptcy schedules and make sure that each creditor is getting notice at the proper address. If not, the debt may not be discharged. Your bankruptcy attorney will see to it that all the addresses are proper so you can be sure all the dischargeable debts will be permanently wiped out.
Calculate Your Total Monthly Household Income
After your list of debts has been completed, the next step in filing Chapter 7 is to calculate your total monthly household income. Your household income is calculated by adding up all the income earned in the preceding 6 months from all sources (except social security or disability benefits) for yourself (and your spouse if you are married). If you are filing your Chapter 7 Bankruptcy individually (without including your spouse), your spouse’s income must still be included in the calculation for purposes of establishing total household income in the Means Test. If your household income is too high (based on a statutory set of formulas), then you will not qualify for Chapter 7, but will likely qualify for Chapter 13. However, if you do qualify for Chapter 7 based on the Means Test, you can proceed to the next step.
Assets & Exemptions
Now that we’ve determined that you qualify to file for Chapter 7 Bankruptcy, you need to determine whether you have any unexempt assets that may be taken away and liquidated. Each state has its own different rules about what assets you can keep in a Chapter 7 Bankruptcy. For example, Florida provides debtors with a $1,000 per person exemption for household goods and furnishings + $1,000 per person for equity in a vehicle. In addition, Florida provides an unlimited exemption for equity in the debtor’s primary residence/homestead and an additional $4,000 per person for debtors who do not own any real estate. With this exemption structure, Florida is simultaneously the most generous and most stingy state in the nation. However, nearly all states completely exempt retirement accounts (including IRAs, 401(k)s, Pensions, and Health Savings Accounts). To find out which state’s exemption rules apply to your bankruptcy filing and how much of your property will be exempt, you should consult with your bankruptcy attorney.
If it’s determined that you will be forced to surrender property in a Chapter 7 bankruptcy and that is not an acceptable option for you, the Chapter 13 will provide you with the same benefits as Chapter 7 without being required to surrender any of your assets or property. You’ll simply submit a proposed payment plan (based on what you can afford to pay) for either 3 or 5 years. However, if it’s determined that you are not at risk of losing any essential assets or property, then you can proceed with the Chapter 7 bankruptcy filing.
Redemption, Reaffirmation, Assumption, or Surrender?
Before filing your Chapter 7 bankruptcy case, you’ll be required to advise the court what your intentions are with secured loans. Secured loans are loans that have some collateral backing them up. The most common types of secured loans in bankruptcy are mortgages and auto loans. In your bankruptcy schedules, you’ll be required to check a box for either (1) Redemption, (2) Reaffirmation, (3) Ride-Through, or (4) Assumption. Each option is explained briefly below…
- Redemption – If you choose to redeem the asset, you will have to pay the creditor the current replacement value (i.e., retail value) of the property in one lump sum.
- Reaffirmation – If you choose to reaffirm your debt, you agree to continue the contractual payments on the asset and if that asset is repossessed in the future, you will be liable for any resulting deficiency balance. In exchange, the creditor continues to report the account and all subsequent payments on your credit report.
- Assumption – If your vehicle is leased, you may elect to assume the lease, keep the vehicle, and continue making regular monthly payments for the remainder of the lease.
- Surrender – If you decide that the asset is not worth keeping, or that you simply can’t afford it, you can surrender the property after the automatic stay protections have been lifted.
Before filing Chapter 7, you will be required to complete a credit counseling course. Our clients are provided a link or phone number to complete the course remotely and the cost of course is included in the bankruptcy fee. This course (and the 2nd, post-filing course) have been the subject of scrutiny lately and there are efforts in place to rescind their requirement. Until they are no longer required by the law, you will have to complete them in order to file your Chapter 7 bankruptcy case and obtain your discharge.
Petition, Schedules, and Statements
The final step before filing your Chapter 7 bankruptcy case is to review the Voluntary Petition, Schedules, and Statements to make sure they are complete, truthful, and accurate. It’s also important that you understand all the implications of filing your case, most importantly where you stand with regard to assets and exemptions.
Meeting with your Chapter 7 Bankruptcy Trustee
As soon as your Chapter 7 bankruptcy case is filed and processed by the bankruptcy court, a Chapter 7 Trustee will be randomly assigned to your case and a meeting will be scheduled for approximately 35 days out. You will receive notice providing the details of the meeting and so will your creditors. You will also be required to provide any bank statements that are issued between your case filing date and your meeting date. You will be required to attend this meeting either in person or remotely (check your notice or ask your attorney if you are not sure the method assigned to your meeting). The Chapter 7 Trustee’s job is to confirm your identity and to make sure everything is in order with your case. If you have any significant nonexempt assets to administer, the Trustee will coordinate with you on how to transfer possession of those assets at the meeting. Our clients receive a thorough briefing of their meeting 1–2 days in advance and a debriefing immediately after the meeting.
Contact a Bankruptcy Lawyer Today
At The Law Offices of Emil Fleysher, P.A., we are dedicated to diligently and compassionately helping clients resolve their debt problems and get a fresh financial start. We are here to guide you through every step of filing for Chapter 7 Bankruptcy and will help you get the best possible outcome. Contact us online or call us today at 888-886-0200 to schedule a consultation.