Transcript Bankruptcy – Chapter 7

Bankruptcy –
Chapter 7
What you need to know if you are
thinking of filing a Chapter 7
Bankruptcy.
Overview (continued on next page)
Bankruptcy may make it possible for you to:
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Eliminate the legal obligation to pay most or all of your
debts. This is called a "discharge" of debts. It is designed
to give you a fresh financial start. (see Tennessee
bankruptcy exemptions)
Stop foreclosure on your house or mobile home and allow
you an opportunity to catch up on missed payments.
(Bankruptcy does not, however, automatically eliminate
mortgages and other liens on your property without
payment.)
Prevent repossession of a car or other property, or force
the creditor to return property even after it has been
repossessed.
Overview (continued)
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Stop wage garnishment, debt collection harassment, and
similar creditor actions to collect a debt.
Restore or prevent termination of utility service.
Allow you to challenge the claims of creditors who have
committed fraud or who are otherwise trying to collect
more than you really owe
Topics We Will Cover
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What is a Chapter 7 Bankruptcy?
The Process of Filing Chapter 7
Are there any debts I can’t discharge?
Tennessee Bankruptcy Exemptions
What property, if any, can I keep?
Reaffirmation
Resources
What is a Chapter 7 Bankruptcy?
In a Chapter 7 bankruptcy you wipe out your debts
and get a "Fresh Start". Chapter 7 bankruptcy is a
liquidation where the trustee collects all of your assets
and sells any assets which are not exempt. (see
Tennessee Exemptions) The trustee sells the assets and
pays you, the debtor, any amount exempted. The net
proceeds of the liquidation are then distributed to
your creditors with a commission taken by the trustee
overseeing the distribution.
The Process of Filing Chapter 7
Gathering Paperwork
To begin the bankruptcy process you must itemize your
current income sources; major financial transactions for
the last two years; monthly living expenses; debts (secured
and unsecured); and property (all assets and possessions,
not just real estate). You should also collect your tax
returns for the last two years, deeds to any real estate you
own, your car(s) titles, and the documents for any loans
you may have.
The Process of Filing Chapter 7
Filing the Petition
Once you have gathered this information, either on
your own or with the help of an attorney, you should
then determine which property you believe is exempt
from seizure based on the Tennessee exemptions. To
actually file, either your or your attorney, will need to
file a two-page petition and several other forms at
your Tennessee district bankruptcy court.
The Process of Filing Chapter 7
Filing the Petition
These forms, collectively are referred to as the schedules
and ask you to describe your current financial status and
recent financial transactions (typically within the last two
years). If your creditors or the judge feel or find out that
you have not been entirely forthcoming in your
bankruptcy filing, it could jeopardize the outcome of your
petition.
The cost for filing a Chapter 7 bankruptcy is $200. This fee
may not be waived but you may be able to pay it in
installments. The fee of $185 for a Chapter 13 bankruptcy
can not be waived.
The Process of Filing Chapter 7
The Automatic Stay
Once you have filed your
paperwork with the
bankruptcy court, an
automatic stay
immediately goes into
effect. This provision
prevents creditors from
making direct contact
with you or staking a
claim on any of your
property from the day of
filing forward.
This will stop any
foreclosure proceedings. If
you have filed Chapter 13,
you must begin making
your plan payments.
Generally these payments
will be withdrawn directly
from your wages and you
or your attorney should
arrange for these
payments to be deducted
from your wages
The Process of Filing Chapter 7
The Bankruptcy Trustee
Upon filing, the court will assume legal control of your
debts and property not covered by your Tennessee
exemptions. A trustee will be appointed to your case by the
court. The job of the trustee is to see that your creditors
are paid as much as possible. This person will thoroughly
review your paperwork, particularly the assets you have in
your possession and the exemptions you wish to claim, and
can challenge any element of your case.
The Process of Filing Chapter 7
The Meeting of Creditors
Approximately a month after filing, the trustee will call a
first meeting of creditors, which the debtor must attend.
This proceeding is also referred to as the § 341 meeting,
named after the corresponding section of the bankruptcy
code. Creditors rarely attend a Chapter 7 bankruptcy
meeting; one or two creditors may attend a Chapter 13
meeting, especially if there is a question as to the legitimacy
of some aspect of the plan. Objections are typically resolved
by negotiation between the debtor or the debtor's counsel
and the creditor. If a compromise can not be reached, a
judge will intervene.
The Process of Filing Chapter 7
The Meeting of Creditors
The meeting of creditors typically lasts about five
minutes. You will receive notice of the location of the
meeting but you may contact the court to confirm the
address and time. (see Tennessee Bankruptcy Court
Directory)
Most Chapter 7 filings involve no non-exempt assets,
however, if you filed for Chapter 7 and do have nonexempt assets, you will have to turn over non-exempt
property (or its fair market value in cash) to the
trustee after the meeting.
Continued on next page…
The Process of Filing Chapter 7
The Meeting of Creditors (continued)
The trustee will sell this property and distribute the
proceeds to your creditors. If the property isn't worth a
great deal or would be hard to sell, the trustee may decide
to abandon the property (and return it to you). Trustees
and creditors have 60 days to challenge the debtor's right
to a discharge. If there are no challenges, you will receive a
notice from the court that your dischargeable debts have
been discharged within roughly three to six months.
The Process of Filing Chapter 7
The Meeting of Creditors
Most Chapter 7 filings involve no non-exempt assets, however, if
you filed for Chapter 7 and do have non-exempt assets, you will
have to turn over non-exempt property (or its fair market value
in cash) to the trustee after the meeting.
The trustee will sell this property and distribute the proceeds to
your creditors. If the property isn't worth a great deal or would
be hard to sell, the trustee may decide to abandon the property
(and return it to you). Trustees and creditors have 60 days to
challenge the debtor's right to a discharge. If there are no
challenges, you will receive a notice from the court that your
dischargeable debts have been discharged within roughly three
to six months.
Are there any debts I can’t discharge?
Certain debts cannot be discharged in a Chapter 7
bankruptcy, such as alimony, child support, fraudulent
debts, certain taxes, student loans, and certain items
charged.
Usually, large credit card debt and other unsecured bills
coupled with few assets typify a Chapter 7 bankruptcy
filer. In the vast majority of cases this type of bankruptcy
is able to completely eliminate all of the filers debts.
What property, if any, can I keep?
You may keep certain secured debts such as your car
or your furniture or house by reaffirming those debts.
To do so, you must sign a voluntary "Reaffirmation
Agreement". However, you cannot wipe out that debt
(or discharge the debt) for another six years. In other
words, if you decide that you want to keep your house
or your car or your furniture, and you reaffirm the
debt, you cannot bankrupt (or wipe-out) that debt
again for six years. You will still owe that debt and you
must continue to pay it just as you were to continue to
pay it before you filed the bankruptcy.
Tennessee Bankruptcy Exemptions
The Tennessee bankruptcy exemptions chart, details the
property you can exempt or protect from creditors. You
may exempt any property that falls into one of the
exemptions categories below, up to the dollar amount listed.
You will be able to kept this exempted property after you
file bankruptcy. Please note that there are certain debts
which you will not be able to erase in bankruptcy.
Tennessee Bankruptcy Exemptions
An exemption limit applies to any equity you have
in the property. Equity is the difference between
the value of the property and what is owed on the
property. For example, a car valued at $5000 with
a loan of $4500 has an equity value of only $500.
continued on next page…
Tennessee Bankruptcy Exemptions
If the property is secured by a loan, such as a car or home,
and you are current on the payments, the equity is covered
by your exemptions, and you elect to keep making
payments on the loan you generally can keep this property
through the bankruptcy. If all the equity is not covered by
your exemptions the trustee may elect to liquidate this
asset and distribute the assets. Generally, in this case, you
would be entitled to the value of your exemption in the
asset as a cash payment.
continued on next page…
Tennessee Bankruptcy Exemptions
Bankruptcy law allows married couples filing jointly to
each claim a full set of exemptions, unless otherwise noted.
To keep non-exempt property, a debtor must generally pay
the trustee the value of the non-exempt property.
You also may use certain federal exemptions in addition to
your Tennessee exemptions.
More About Reaffirmation
In order to reaffirm the debt, you must also bring it current.
In other words, if you are three or four months behind,
then you must pay the back payments which are due in
order to reaffirm it. You can selectively reaffirm your debts
- you can state that you wish to keep the house and the
furniture, but that you want the car and the jewelry to go
back to the respective Creditors.
Reaffirmation agreements can be set aside during the
earlier of 60 days after the agreement is filed with the
Court, or upon the Court's issuance of an Order of
Discharge.
How Will A Chapter 7 Affect My Credit?
There is no clear answer to this question. Unfortunately, if
you are behind on your bills, your credit may already be
bad. Bankruptcy will probably not make things any worse.
The fact that you've filed a bankruptcy can appear on your
credit record for ten years. But since bankruptcy wipes out
your old debts, you are likely to be in a better position to
pay your current bills, and you may be able to get new
credit.
Resources
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Tennessee Bankruptcy Law
Tennessee Bankruptcy Law Frequently Asked Questions
Tennessee Bankruptcy Exemption Chart
United States Bankruptcy Court for the Middle District of
Tennessee