Chapter 7

If you are unable to pay your existing debts, then a Chapter 7 may be the answer for you. In a Chapter 7 bankruptcy a person wipes out all of their debt and they get a "Fresh Start." This is accomplished by liquidation. In other words, the court-appointed Chapter 7 Trustee collects all of your assets and sells those which are non-exempt under the Bankruptcy Code. The net proceeds of the liquidation are then distributed to your creditors, and the Trustee takes a commission taken for overseeing the distribution.

A debtor does have certain exemptions under the bankruptcy code. If the debtor has enough exemptions, then the trustee will not liquidate or sell the debtors assets. If the debtor has assets that exceed their exemptions, then the Trustee calls this an asset case, and he will make arrangements to sell the debtors assets to collect monies.

The common assets that the Trustee looks for are homes with a significant amount of equity, personal injury awards, tax refunds, and inheritances.

The one exception to the Chapter 7 liquidation is the "Reaffirmation Agreement." This gives you the flexibility to retain certain secured debts that you select, such as your house or car, by curing arrearages and signing a voluntary Reaffirmation Agreement. Once you have done so, however, you are precluded from wiping out, or discharging, that debt for another six (6) years. Execution of the Reaffirmation Agreement will document that you will still owe that debt and you are obligated to pay it just as you were obligated before you filed bankruptcy. Reaffirmation agreements can only be set aside during the first sixty (60) days after the Reaffirmation Agreement is filed with the Court, or upon the Court's issuance of an Order of Discharge. Although the primary purpose of the Chapter 7 bankruptcy is to wipe out all of your debt, certain debts are non-dischargeable and they can not be wiped out. These debts include back child support, alimony obligations and other debts incurred by family support obligations, debts for personal injury or death caused by driving while intoxicated, student loans, fines and penalties for violating the law including traffic tickets and criminal restitution, income tax debts incurred within the last three (3) years and all other tax debts, and debts you forget to list in your bankruptcy papers.

Usually within six (6) weeks of filing your petition, you will be required to attend a Meeting of Creditors. The meetings of the creditors are held at the Federal Court House in Trenton, and at One Newark Center, in Newark. The Trustee will preside, and ask any questions necessary to determine if the case will be classified as an asset case. The Trustee will carefully review the petition with the lawyer and the debtor, and make sure that all of the information in it is accurate and truthful. The Chapter 7 bankruptcy is typically concluded within three (4) to six (6) months, at which time the United States Bankruptcy Court will issue a Discharge of Debtor. You are then precluded from filing for bankruptcy again for another six (6) years. We understand that filing a Chapter 7 petition and liquidating all of your assets may be devastating. However, if you find yourself in a position where you simply cannot repay your existing debt, call Theodore Sliwinski, Esq. at (732) 257-0708. He will guide you through the Chapter 7 bankruptcy and get you a "fresh start" that you deserve. Don't delay! The bankruptcy laws may be ""reformed"" soon, and you may be stopped from filing forever!

CHAPTER 7: THE PROCESS: FILING AND GOING TO COURT

The Chapter 7 bankruptcy process usually lasts between 3-6 months. The key issue as to the length of your case depends on the extent of the debtors assets, and the nature of the debts. Another factor is how busy the court is. However, the Bankruptcy Courts in recent years have been extremely efficient, and the cases are processed in a very expedient manner.

Once the debtor files for bankruptcy, no collection actions may be taken against you. The automatic stay stops all efforts to collect any debts against the debtor This means that any bank accounts you have may not be seized by a bank levy. The debtor's wages can't not be garnished. If a garnishment is in effect, then the garnishment must be immediately stopped. All repossessions must also be stopped. Moreover, if a debtor's vehicle has been repossessed, then the creditor must return the vehicle as long as the debtor can prove that he has adequate insurance on the vehicle.

The debtor will then be called to attend a Meeting of Creditors. This meeting is usually held within 6 weeks after the case is filed. This is the only opportunity that your creditors have to ask you questions regarding your financial situation. This meeting is typically extremely fast, and most creditors do not show up. The only creditor who usually shows up is Sears. A representative from Sears will usually try to talk the debtor into signing a reaffirmation agreement to enable the debtor to keep their items purchased from that store.

The Trustee, who is the attorney assigned by the court to determine if you have any assets which may be seized for the benefit of your creditors, will be present to ask you a number of questions. Theodore Sliwinski, Esq. will appear with you at the meeting of creditors with you, and will prepare you thoroughly to avoid any surprises that can occur.

HOW LONG DOES A CHAPTER 7 FILING STAYS ON YOUR CREDIT REPORT

The fact that you filed for Chapter 7 bankruptcy can appear on your credit report for as long as 10 years. Thus, filing a bankruptcy petition may affect your ability to obtain credit in the future. Such credit includes credit cards, mortgages, car loans, and business loans that you secure personally. Nonetheless, many people who file bankruptcy are able to re-establish their credit. Many person's credit is actually improved after they file for bankruptcy. Many credit card companies view a recently-discharged debtor as an ideal new customer because they can file for bankruptcy only once every six years.

 By Theodore Sliwinski, Esq.