The law provides for very specific criteria in order to file for Chapter 7 Bankuptcy. The process can take months, but is made much easier with the assistance of a local attorney.
You cannot receive a discharge in a Chapter 7 bankruptcy if you received a prior Chapter 7 discharge within the last 8 years. You may however still receive a Chapter 7 discharge if you filed Chapter 13 bankruptcy in the last 6 years and repaid at least 70% of your unsecured debt back in that prior Chapter 13 bankruptcy.
The state exemptions that you must claim in a Chapter 7 bankruptcy are determined by where you lived 2 years (730 days) prior to filing. In an effort by Congress to prevent venue or jurisdiction shopping, you must use whatever state’s exemptions you lived in 2 years before your case is filed.
If you lived in multiple states during this 2-year period, you must claim the state’s exemptions where you lived 6 months prior to the 2-year deadline, or in other words, 2.5 years before your case is filed.
The court may deny you a Chapter 7 discharge if you have attempted to defraud a creditor by transferring or concealing property within one year before the filing of your Chapter 7 bankruptcy. In these cases, a Chapter 7 Trustee has the power to recover the transferred property from the person(s) to whom you transferred it to, then liquidate it and use the proceeds to repay your creditors.
If you repay $600 or more to one of your relatives or business partners (also called “insiders”) within one year prior to filing a Chapter 7 bankruptcy, it is known as a preferential payment. The Chapter 7 Trustee has the power to recover preferential payments from the people to whom you made them and use that money to repay your creditors.
Within 180 days before filing bankruptcy, you must receive a credit counseling briefing from an approved nonprofit budget and credit counseling agency. This counseling briefing is a question and answer session with an approved non-profit credit counselor who tries to help you see if there is a way you could repay your debt and avoid bankruptcy. The briefing usually takes around 45-90 minutes and can be done via telephone, in-person, or online. If the course is not completed within the 180 days prior to filing your bankruptcy, your case is dismissed.
You cannot file a Chapter 7 bankruptcy if you had a previous bankruptcy dismissed within the preceding 180 days because either:
You must be a resident in the state in which you are filing for the last 90 days. If you have not resided in the state that long, you can only file in the state where you have resided, or which has been your principal place of business or which has been the location of your principal assets for the majority of the last 180 days.
If you repay $600 or more to an individual creditor within 90 days prior to filing your Chapter 7, it is considered a preferential payment. The Chapter 7 Trustee has the power to recover preferential payments from the creditors to whom you made them and use that money to repay your creditors.
If you incur $500 or more of “luxury goods or services” credit from any individual creditor within the 90-day period before your Chapter 7 bankruptcy is filed, the debt is presumed to be non-dischargeable and you may have to repay this debt back.
If you incur $750 or more of credit card cash advances within 70-day period before your Chapter 7 bankruptcy is filed, the debt is presumed to be non-dischargeable and you may have to repay this debt.
Your Chapter 7 bankruptcy is officially commenced when your bankruptcy attorney files your petition with the Bankruptcy Court. (Married couples have the opportunity to file one petition together and commence a joint case.) The filing of your Chapter 7 bankruptcy also commences the automatic stay which prohibits your creditors from any further collection actions against you.
When your bankruptcy is filed, the Bankruptcy Court assigns a Chapter 7 Trustee to administer your case and schedules your 341 Meeting of the Creditors.
Within 15 days after filing your Chapter 7 bankruptcy, your attorney must file any bankruptcy schedules that he or she did not file when with your bankruptcy petition. These schedules list your assets and liabilities, your current income and expenditures, any contracts and unexpired leases, and a statement of your financial affairs. In most cases, your attorney files all these required documents when your petition is filed.
The Bankruptcy Court sends official notice of your Chapter 7 bankruptcy to you and all of the creditors listed on your petition approximately 15 days after the filing of your case. This notice informs you of the date and time set by the bankruptcy court for your 341 Meeting of the Creditors. It also informs your creditors of the deadline to object to your case.
Approximately 30-45 days after the filing of your Chapter 7 bankruptcy, your 341 Meeting of the Creditors is held. You and your attorney are required to attend this meeting and testify under oath as to the accuracy of your filed Chapter 7 petition in front of your assigned Trustee. If you do not attend the 341 Meeting, your case can be dismissed, and you have a record of bankruptcy on your credit report without having the benefit of receiving a discharge of your debt.
341 Meetings are usually short and painless and it is uncommon for creditors to attend the meeting. Your bankruptcy attorney is present at this meeting to represent you.
SPECIAL NOTE ***Per the Bankruptcy Code, all required Trustee documents must be tendered to the Trustee by you or your attorney 7 days prior to the 341 Meeting. These documents vary by Trustee and jurisdiction, but will usually include your last 2 years of tax returns and 60 days of paystubs immediately prior to the filing date of your Chapter 7.***
Within 30 days after the filing of your Chapter 7 petition, your bankruptcy attorney must file your Statement of Intention. This document is also part of the Chapter 7 petition and indicates whether you are surrendering or reaffirming any debt that is secured by collateral, such as a car or a house. If you plan to keep your secured property, the Statement of Intention needs to indicate whether you intend to: (1) reaffirm the debt and continue to make the payments under the same terms of the original agreement, or (2) redeem the property by paying the fair market value of the secured property to the original creditor. Any difference owed to the original creditor above and beyond the fair market value of the property will be discharged in your Chapter 7 bankruptcy.
45 days after your attorney has filed your bankruptcy, the Statement of Available Chapters must be filed with the court. The Statement of Available Chapters is a certificate from your attorney that you received an explanation of the various chapters of bankruptcy that are available to you under the bankruptcy code. This document is normally filed by your attorney when he initially files your petition.
Your creditors and your Chapter 7 Trustee have 30 days after the conclusion of the 341 Meeting to object to any exemptions you have claimed in Schedule C of the bankruptcy petition. Most 341 Meetings are concluded on the same day they are heard by the Trustee, although the Trustee has the power to continue your 341 Meeting to a later date. Any extension by the Trustee extends the time that your creditors have to object to your claimed exemptions.
To be able to receive a Chapter 7 Discharge, you must complete your post-petition financial management course within 60 days after your 341 Meeting. To be able to receive a Chapter 13 Discharge, you must complete your post-petition financial management course before the completion of your case. This course is of an instructional nature and is tailored around managing your personal finances after bankruptcy. The class takes approximately 2 hours and can be done over the telephone or online. If the briefing is not completed within the allotted time period, you may not receive a discharge.
Your creditors have 60 days after the first date set for your 341 Meeting to file an objection to the discharge of a particular debt. The Bankruptcy Code allows your creditors to object to the discharge of one of your debts based one of the following:
Deadline for Your Creditors to Object to the Discharge of all the Debt Claimed in Your Chapter 7 Bankruptcy
Your creditors have 60 days after the first date set for the 341 Meeting to file an objection to the discharge of all debt claimed in your Chapter 7. The Bankruptcy Code allows your creditors to object to the discharge of all debts claimed in your Chapter 7 based on one of the following:
Deadline for the U.S. Trustee or Bankruptcy Court to Move to Dismiss Your Case for Substantial Abuse
The U.S. Trustee or the bankruptcy Court may move to dismiss your case for substantial abuse within 60 days after the first date set of the 341 Meeting. This motion is typically brought by The U.S. Trustee or the Bankruptcy Court when they believe that the granting of a discharge would be a substantial abuse of the Chapter 7 Bankruptcy Code. “Substantial abuse” has been generally defined by most bankruptcy judges to mean that you have the sufficient disposable income to pay a portion of your debt back over a 36 to 60-month period.
Your Chapter 7 discharge is entered by the Bankruptcy Court as soon as the 60-day time period for your creditors to object to discharge or dismiss your case expires. Your discharge papers usually arrives by official mail to your listed address on the bankruptcy petition 75-90 days after your 341 Meeting.
If any of your assets are available for liquidation and distribution to your creditors by the Chapter 7 Trustee, your creditors must file their proofs of claim within 90 days after your 341 meeting if they wish to receive in any monies from your case.
**Please note that any government entities that are your creditors have 180 days after the filing of your case to submit their proofs of claim.**