Understanding Chapter 7 Bankruptcy
Chapter 7 Does NOT Mean that They are Going to Liquidate Your Assets
Chapter 7 “liquidation” implies that there will be a sale of an individual’s or business’ assets, with the sale proceeds to be paid to the creditors. Fortunately for individuals, the law allows individual debtors to keep enough of their assets to enable the individual to have a “fresh start” while eliminating unsecured debts through a bankruptcy discharge.In most cases, individuals can keep all of their unencumbered assets in Chapter 7 cases. Sometimes, individual debtors use Chapter 7 bankruptcy to “walk away” from assets whose value is far below what they owe, such as an older car with a high loan balance; individuals have a choice in those circumstances, it is not a result forced on them.
Your attorneys at Seelinger Law will evaluate your circumstances, including the value of your assets and any risk associated with losing assets to a trustee sale, before advising you to file for Chapter 7 bankruptcy. If there is a serious risk that an asset would be sold in Chapter 7, you may be advised to file for Chapter 13 relief, instead. The goal of a Chapter 7 case is to have the debtor’s personal liability to the creditors, with some exceptions, such as student loans, eliminated, or “discharged.”
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How Filing for Chapter 7 Relief Can Truly Help You
You May Benefit from Chapter 7 Bankruptcy if
- You are drowning in credit card debt, struggling to make the minimum payments each month with most of that money going to finance charges, and with your balances barely changing
- You lost your job and fell behind on your bills, resulting in calls from your creditors demanding payments that you cannot afford to make
- You became ill or were injured, resulting in your missing work and/or being stuck with large medical bills
- You experienced divorce, and your living expenses or credit card payments are no longer affordable without your former spouse’s income
- You are being sued by your creditors, who want to seize the funds in your bank account
- You find yourself so far in debt that you realize it will be impossible to pay your debts off
How Long Does a Chapter 7 Take to File?
When you choose to file a bankruptcy case through Seelinger Law, we help you gather up the information we need to prepare the bankruptcy petition, and your case is filed as soon as you are ready to do so. If you are in urgent need of bankruptcy protection due to actions taken by your creditors, we can file the bankruptcy on an emergency basis, so that creditors’ actions to collect or to seize your assets are stopped, even if you have not yet finished gathering up all of the information needed for the bankruptcy paperwork.
The Chapter 7 Bankruptcy Trustee
During the filing process, a trustee will be assigned to your Chapter 7 case. The trustee does not represent the creditors but is responsible for overseeing the bankruptcy estate. The trustee does not work for the Bankruptcy Court but instead is an independent attorney who has been appointed by the Department of Justice to serve as trustee in cases filed under Chapter 7. If a debtor owns property which is not exempt, the trustee is required to take possession of the property and to sell it, to generate money to pay to unsecured creditors. However, when all of your assets are exempt, as is usually the case, there is nothing for the trustee to sell, and instead, the trustee’s only role is to review your case for accuracy.
Enhance Your Life After Filing for Chapter 7 Bankruptcy
When you file for bankruptcy, you can stop paying on credit cards and most unsecured personal loans, and use that money for your living expenses. Without the burden of monthly payments on your dischargeable debts, you will find it easier to pay your utility bills, mortgage or rent payments, to afford groceries and probably an occasional meal out.
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Frequently Asked Questions that Come with Chapter 7 Bankruptcy
What Does the Chapter 7 Trustee Look for at the Meeting of Creditors?
Remember that a trustee is simply a lawyer whose job is to review your case for any errors or omissions and to evaluate whether you have listed all of your property on your paperwork. During the trustee meeting, you will be asked a series of yes or no questions while you are sworn to tell the truth. Your attorney will prepare you for the questions that will be asked, so there is no reason to feel nervous about the trustee meeting. For most clients, this is the only time that they will be setting foot in the bankruptcy courthouse. It is rare for a Chapter 7 debtor to be required to go to an actual courtroom, as the trustee meetings are held in a conference room.
Part of the trustee’s job is to make sure that the creditors are being treated fairly since they will be the ones that are losing money in the bankruptcy process. Keeping this in mind, the trustee will be making sure that you were entirely forthcoming in your paperwork, and will be looking for questions or issues that may benefit your creditors. Some common issues that the trustee looks for are things like undervalued assets, omitted assets, understated income, overstated expenses, recent payments that you might have made to preferred creditors, and any fraudulent transfers of property.
Will the Trustee Chastise Me if My Decision to File is Not Based on Job Loss or Sickness, but Instead, Hasty Spending?
The trustee does not pass judgment on you if you consider yourself to be a ‘shopper’ or a ‘spender.’ In fact, the trustee asks each client their reason for filing bankruptcy at this time and then proceeds to list possible reasons such as illness, loss of income, or “simply overspending”, indicating that overspending is a good enough reason to file for bankruptcy. In other words, you are allowed to make a mistake; you will be given a fresh start.
Seelinger Law can help, and provide you with guidance when you need it most. The hardest part is picking up the phone- call now for your free consultation
5148 Peach Street, Suite 330
Erie, PA 16509
847 N. Main Street, Suite 003B
Meadville, PA 16335
322 N. Shore Drive
Building 1B, Suite 200
Pittsburgh, PA 15212