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Chapter 7 Bankruptcy

What is Chapter 7 Bankruptcy?

A Chapter 7 Bankruptcy is a legal proceeding filed in Federal Court. It is called “Chapter 7 Bankruptcy” because Chapter 7 of the United States Bankruptcy Laws is where you’ll find the rules for a liquidation bankruptcy. You must qualify to file a Chapter 7 Bankruptcy. Qualification is usually based on your income and expenses in the six months before filing.

The person filing bankruptcy is called “the Debtor”. The Debtor’s creditors are called...you guessed it...Creditors. Besides debtors and creditors, every Chapter 7 Bankruptcy has two other participants, called the Bankruptcy Judge and the Chapter 7 Trustee. The Bankruptcy Judge is a Federal Judge who presides over the Chapter 7 case, signing orders and settling disputes. Very few Chapter 7 Debtors ever see the Bankruptcy Judge. Usually, the Chapter 7 Trustee is the only “bankruptcy official” the Debtor meets. The Chapter 7 Trustee is federally-appointed and oversees the administration of his/her assigned cases. Currently, North and East Texas have 19 Chapter 7 Trustees.

A Chapter 7 Bankruptcy is a 90 to 120 day process during which the Debtor’s non-exempt assets are taken by the Chapter 7 Trustee, liquidated if necessary, and then distributed to the Creditors. Whatever debt remains is wiped out, with certain exceptions. The most common exceptions are student loans, child support, and recent income taxes. You can choose to keep certain debts, such as those related to your house and car. What assets are “non-exempt” is too complicated to cover here. But, in most Chapter 7 bankruptcy cases the Trustee does not take any property from the Debtor.

What Happens in A Chapter 7 Bankruptcy?

• The Debtor starts the legal proceeding by filing a Chapter 7 Bankruptcy Petition, a list of creditors, and various documents outlining the Debtor’s assets, debts, income, expenses, and recent transactions.
• Within 2-3 days (or sooner) all creditors receive notice of the Chapter 7 Bankruptcy, and all creditor collection activities stops.
• Within 30-45 days, the Debtor meets with the Chapter 7 Trustee for 10-15 minutes, answering questions under oath. This is called the “Meeting of Creditors”, but creditors rarely attend.
• Within 30-90 days after filing, the Debtor signs any agreements to continue paying certain debts, such as the mortgage and auto loans.  
• Within 90-120 days after filing (exactly 60 days after the Creditor Meeting), the deadline passes for discharge objections, and the Bankruptcy Judge enters an order formally making all dischargeable debts uncollectible.

What Can or Can’t a Chapter 7 Bankruptcy Do for Me?

It Gives the Debtor a Quick Fresh Start

• A Chapter 7 Bankruptcy is short process, as little as 90 days from start to finish. Credit score reestablishment can start immediately thereafter.
• For most people, debt overload causes stress. A Chapter 7 Bankruptcy eliminates debt overload providing relief from the hardship, anxiety, and marital stress.

It Stops Creditor Harassment and Collection Attempts

• The United States Bankruptcy Laws give the Federal Court the power to stop creditor collection activities. This protection is automatic and takes effect instantly upon the filing of a Chapter 7 Bankruptcy.
• For the Debtor, this means the mortgage company, property tax collector, or home owners association can’t foreclose on the house, the auto lender can’t repossess the car, and the credit cards and collection agencies can’t continue to call day and night. The IRS or Attorney General can’t continue to garnish wages, attach liens, or charge penalties and interest on past-due amounts. Most lawsuits against the Debtor are either prohibited or effectively dismissed.

It Creates Breathing Room

• For some Debtors, filing a Chapter 7 is a strategic move that gives the Debtor much-needed short-term breathing room they might not otherwise have to complete a loan modifications, homestead sale, relocations, fine & penalty repayment, or payday loan.

Make Room for the Debts You Can’t Wipe Out.

• You can’t escape some debts, such as child support or employment taxes. And you may need more than 5 years to pay these. If so, then a Chapter 7 Bankruptcy can eliminate some debts to make room for ones you can’t eliminate.

What Chapter 7 Does Not Do

• It does not provide an opportunity to “catch-up” on secured debts.
• It does not stop a “creditor in possession” from seizing assets. Do you have a credit card through your bank? Upon notification of the bankruptcy, that bank can drain your checking or savings balance up to the balance owed on the credit card. Avoiding this requires careful planning.
• It does not wipe out certain kinds of debts, including (but not limited to) child support, employment taxes, recent income taxes, debts incurred through fraud, student loans, and government fines, penalties, and restitutions.

Who Files / Benefits from a Chapter 7 Bankruptcy

Nationwide Chapter 7 Filings
In 2007: ------ 500,613
In 2008: ------ 714,389
In 2009 Q1: --- 223,790

Texas Chapter 7 Filings
In 2007: ------ 17,326
In 2008: ------ 19,311
In 2009 Q1: --- 11,307

North & East Texas Consumer Bankruptcy Filings (Chapter 7/13)
In 2007: ------ 19,806
In 2008: ------ 20,259
In 2009 Q1: --- 5,669

Who are these people…

• The unemployed or underemployed who cannot carry their debt load any further.
• The uninsured with huge medical bills.
• The real estate “flipper” stranded by the recent mortgage upheaval.
• The recent graduate who didn’t budget for credit card payments and student loan bills.

Why Should I Retain The Ford Law Firm, PLLC

You should not file a Chapter 7 bankruptcy without a lawyer. Of course, this isn’t a legal requirement. But, without the help of a competent bankruptcy attorney, you can easily make a mistake that gets your case dismissed, causes you to lose your house or car, or fails to wipe out debts. If something goes wrong in a Chapter 7 bankruptcy, you can’t “unfile” it. The Trustees, Court Clerks, and Judges cannot offer you legal advice or help.

When comparing Chapter 7 bankruptcy lawyers, price and experience are your primary concerns. No set price structure is controlled by the Bankruptcy Judges. A Chapter 7 bankruptcy filed by an experienced bankruptcy lawyer usually costs between $1,500 and $3,000.00. Like anything else, the cheapest is not always the best and the most expensive might not be worth it. Ask about payment plans.

Attorney Thomas Ford is well-versed in the procedures and practices of Chapter 7 bankruptcies in the Dallas, Ft. Worth, Plano, and Tyler regions. He has represented Debtors in 1,000+ bankruptcy cases. Through experience, he know and recognize the importance of pre-bankruptcy planning. If your attorney can’t spot the hidden problems in your Chapter 7 bankruptcy, the process can get much harder and involve more time, more documents, and more fees. It could involve the unexpected forfeiture of property or money, or an outright denial of discharge, meaning you can never wipe out your debts. You need a lawyer that knows this. You need a lawyer that knows the law and the system and can use both to analyze your situation from Day One.

When you retain The Ford Law Firm, our job is to offer you competent advice and act upon your instructions with your best interest at heart. So, if you come to us to file a Chapter 7 Bankruptcy and Attorney Thomas Ford thinks you have a better option, he will tell you. At your final consultation, he’ll discuss various options and how they may or may not benefit you. If you file a Chapter 7 bankruptcy with him, you will know it was the best choice for you.