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When you do not have a steady income to enable you to pay off debts and retain assets, you may choose a straight liquidation bankruptcy under Chapter 7. Chapter 7 does provide you the opportunity to avoid almost all of your debts without making any future payments on those debts. It also prevents future collection efforts by your creditors. However, Chapter 7 will not allow you to discharge certain debts like fraud or deliberate injury; will not allow you to keep certain property and will not allow you to file a case within six years of another Chapter 7 case. What are the procedures involved in taking a Chapter 7, straight liquidation type bankruptcy? First, you or your attorney prepare paperwork including descriptions of what you own, what you owe, your current income and expenses, a statement concerning your financial affairs and a statement of what you intend to do with the property you used as collateral to secure consumer debts. These must be prepared on forms that have been approved by the court. They are filed with the United States Bankruptcy Court, together with a filing fee. Under some circumstances, if you cannot afford to pay the fee in full at the time of filing, you can ask the court for permission to pay the fee in installments after the petition has been filed. The bankruptcy court will then set a date, time and place for a hearing that is called the Section 341 (a) 'meeting of creditors.' You must attend this meeting and answer questions under oath by the trustee and any creditors who appear The questions are about your financial affairs, including your property, past earnings, and the schedules you have filed. Your case may be dismissed if you fail to attend this meeting as scheduled. It is the duty of the trustee, as a representative of your creditors, to determine whether you have properly listed all of your assets, and whether there is some reason why he or she should ask the bankruptcy judge to deny your discharge. It is also the trustee's duty to take possession and sell any of your non-exempt property, to examine claims creditors may file and determine whether they are proper, and to distribute any proceeds of that property among your creditors. Some of your property may be exempt from the claims of your creditors. Working tools, some life insurance, household furnishings, radio, one television, musical instruments, some bank accounts, your automobile, and your home may be exempt, if the value of each is within certain limits, and if you have taken proper steps to claim the exemption. If all of your assets are exempt, and no one objects to your discharge, you will receive your discharge from the debts about 90 days after the meeting of creditors. You will not be discharged from debts that are 'automatically nondischargeable' such as unpaid child support. However, you must do everything reasonably necessary to assist the trustee in collecting your nonexempt assets. You might be required to make further court appearances at his or her request. Also, if anyone objects, for any reason, to your being discharged from all of your debts, or if any creditor objects to your being discharged from any particular debt, you will have to appear in court to defend your position. In the great majority of cases, these issues do not come up. You may ask whether you need an attorney in order to file bankruptcy. If you are an individual or unincorporated sole proprietor, the law does not require you to have an attorney. However, completing all the required documents can be difficult. Also, the filing of a bankruptcy petition is only part of a program to regain financial health. If your petition is filed at the wrong time, you may find that the debts you hoped to have discharged are not discharged...and you will not be permitted to seek a discharge again for six years. Some of your property, which can be made exempt from being taken by the bankruptcy trustee, will be exempt only if you take certain steps to arrange your affairs before you file bankruptcy. Only an attorney can give you legal advice concerning your exemptions. You must request exemptions. Appropriate planning before your petition is filed can save you hundreds or thousands of dollars in the long run. There may be other problems with respect to the discharge of certain debts. These debts should be discussed with an attorney before bankruptcy is filed because it may be unwise to file bankruptcy immediately, or it may be advisable to take other steps to resolve that particular indebtedness. If you have pledged property to a creditor to secure a debt, then generally you must either pay for the property or give it back to the creditor. This is true even if the property is exempt. You may have to attend another hearing before the judge after you receive your discharge if you have worked out a deal with a secured creditor to keep some property, unless your attorney files the proper declaration as to each debt you want to pay off. Remember, there are debt repayment programs that are alternatives to a Chapter 7 straight liquidation and may be available to you. |
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