HOW CHAPTER 7 WORKS
BANKRUPTCY LAWYER IN BERGEN COUNTY NJ (201) 646-3333
The courts must charge a $245 case filing fee, a $75 miscellaneous administrative fee, and
a $15 trustee surcharge. Normally, the fees must be paid to the clerk of the
court upon filing. With the court's permission, however, individual debtors may
pay in installments. 28 U.S.C. § 1930(a); Fed. R. Bankr. P. 1006(b);
Bankruptcy Court Miscellaneous Fee Schedule, Item 8. The number of installments
is limited to four, and the debtor must make the final installment no later
than 120 days after filing the petition. Fed. R. Bankr. P. 1006. For cause
shown, the court may extend the time of any installment, provided that the last
installment is paid not later than 180 days after filing the petition. Id. The
debtor may also pay the $75 administrative fee and the $15 trustee surcharge in
installments. If a joint petition is filed, only one filing fee, one administrative
fee, and one trustee surcharge are charged. Debtors should be aware that
failure to pay these fees may result in dismissal of the case. 11 U.S.C.
§ 707(a).
If the
debtor's income is less than 150% of the poverty level (as defined in the
Bankruptcy Code), and the debtor is unable to pay the chapter 7 fees even in
installments, the court may waive the requirement that the fees be paid. 28
U.S.C. § 1930(f).
In order to complete the Official Bankruptcy Forms that make up the petition, statement of financial affairs, and schedules, the debtor must provide the following information:
- A list of all creditors and the amount and nature of their claims;
- The source, amount, and frequency of the debtor's income;
- A list of all of the debtor's property; and
- A detailed list of the debtor's monthly living expenses, i.e., food, clothing, shelter, utilities, taxes, transportation, medicine, etc.
Married
individuals must gather this information for their spouse regardless of whether
they are filing a joint petition, separate individual petitions, or even if
only one spouse is filing. In a situation where only one spouse files, the
income and expenses of the non-filing spouse are required so that the court,
the trustee and creditors can evaluate the household's financial position.
Among the
schedules that an individual debtor will file is a schedule of
"exempt" property. The Bankruptcy Code allows an individual debtor(4) to protect some property from the claims of creditors because it is exempt
under federal bankruptcy law or under the laws of the debtor's home state. 11
U.S.C. § 522(b). Many states have taken advantage of a provision in the
Bankruptcy Code that permits each state to adopt its own exemption law in place
of the federal exemptions. In other jurisdictions, the individual debtor has
the option of choosing between a federal package of exemptions or the
exemptions available under state law. Thus, whether certain property is exempt
and may be kept by the debtor is often a question of state law. The debtorshould consult an attorney to determine the exemptions available in the state
where the debtor lives.
Filing a
petition under chapter 7 "automatically stays" (stops) most
collection actions against the debtor or the debtor's property. 11 U.S.C.
§ 362. But filing the petition does not stay certain types of actions
listed under 11 U.S.C. § 362(b), and the stay may be effective only for a
short time in some situations. The stay arises by operation of law and requires
no judicial action. As long as the stay is in effect, creditors generally may
not initiate or continue lawsuits, wage garnishments, or even telephone calls
demanding payments. The bankruptcy clerk gives notice of the bankruptcy case to
all creditors whose names and addresses are provided by the debtor.
Between 21
and 40 days after the petition is filed, the case trustee (described below)
will hold a meeting of creditors. If the U.S. trustee or bankruptcyadministrator (5) schedules the meeting at a place that does not have regular
U.S. trustee or bankruptcy administrator staffing, the meeting may be held no
more than 60 days after the order for relief. Fed. R. Bankr. P. 2003(a). During
this meeting, the trustee puts the debtor under oath, and both the trustee and
creditors may ask questions. The debtor must attend the meeting and answer
questions regarding the debtor's financial affairs and property. 11 U.S.C.
§ 343. If a husband and wife have filed a joint petition, they both must
attend the creditors' meeting and answer questions. Within 10 days of the
creditors' meeting, the U.S. trustee will report to the court whether the case
should be presumed to be an abuse under the means test described in 11 U.S.C.
§ 704(b).
It is
important for the debtor to cooperate with the trustee and to provide any
financial records or documents that the trustee requests. The Bankruptcy Code
requires the trustee to ask the debtor questions at the meeting of creditors to
ensure that the debtor is aware of the potential consequences of seeking a discharge
in bankruptcy such as the effect on credit history, the ability to file a
petition under a different chapter, the effect of receiving a discharge, and
the effect of reaffirming a debt. Some trustees provide written information on
these topics at or before the meeting to ensure that the debtor is aware of
this information. In order to preserve their independent judgment, bankruptcyjudges are prohibited from attending the meeting of creditors. 11 U.S.C.
§ 341(c).
In order to
accord the debtor complete relief, the Bankruptcy Code allows the debtor to
convert a chapter 7 case to a case under chapter 11, 12, or 13 (6) as long as
the debtor is eligible to be a debtor under the new chapter. However, a
condition of the debtor's voluntary conversion is that the case has not
previously been converted to chapter 7 from another chapter. 11 U.S.C.
§ 706(a). Thus, the debtor will not be permitted to convert the case
repeatedly from one chapter to another.
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