Accordingly, potential debtors should realize that the filing of a petition under chapter 7 may result in the loss of property.
To qualify for relief under chapter 7 of the Bankruptcy Code, the debtor may be an individual, a partnership, or a corporation or other business entity.
Under chapter 11, the debtor may seek an adjustment of debts, either by reducing the debt or by extending the time for repayment, or may seek a more comprehensive reorganization. If a debt management plan is developed during required credit counseling, it must be filed with the court. Moreover, a bankruptcy discharge does not extinguish a lien on property.
Sole proprietorships may also be eligible for relief under chapter 13 of the Bankruptcy Code. If the debtor's "current monthly income" (1) is more than the state median, the Bankruptcy Code requires application of a "means test" to determine whether the chapter 7 filing is presumptively abusive. Debtors should also be aware that out-of-court agreements with creditors or debt counseling services may provide an alternative to a bankruptcy filing. One of the primary purposes of bankruptcy is to discharge certain debts to give an honest individual debtor a "fresh start." The debtor has no liability for discharged debts. A chapter 7 case begins with the debtor filing a petition with the bankruptcy court serving the area where the individual lives or where the business debtor is organized or has its principal place of business or principal assets.
In addition, individual debtors who have regular income may seek an adjustment of debts under chapter 13 of the Bankruptcy Code. Abuse is presumed if the debtor's aggregate current monthly income over 5 years, net of certain statutorily allowed expenses, is more than (i) $12,850, or (ii) 25% of the debtor's nonpriority unsecured debt, as long as that amount is at least $7,700. A chapter 7 bankruptcy case does not involve the filing of a plan of repayment as in chapter 13. In addition, no individual may be a debtor under chapter 7 or any chapter of the Bankruptcy Code unless he or she has, within 180 days before filing, received credit counseling from an approved credit counseling agency either in an individual or group briefing. In a chapter 7 case, however, a discharge is only available to individual debtors, not to partnerships or corporations. (3) In addition to the petition, the debtor must also file with the court: (1) schedules of assets and liabilities; (2) a schedule of current income and expenditures; (3) a statement of financial affairs; and (4) a schedule of executory contracts and unexpired leases.
A particular advantage of chapter 13 is that it provides individual debtors with an opportunity to save their homes from foreclosure by allowing them to "catch up" past due payments through a payment plan. (2) The debtor may rebut a presumption of abuse only by a showing of special circumstances that justify additional expenses or adjustments of current monthly income. Instead, the bankruptcy trustee gathers and sells the debtor's nonexempt assets and uses the proceeds of such assets to pay holders of claims (creditors) in accordance with the provisions of the Bankruptcy Code.
If you have questions or concerns regarding a specific Chapter 11 filing, it is prudent to seek advice from a qualified bankruptcy attorney.
Debtors should be aware that there are several alternatives to chapter 7 relief. With the court's permission, however, individual debtors may pay in installments.
For cause shown, the court may extend the time of any installment, provided that the last installment is paid not later than 180 days after filing the petition. The debtor may also pay the administrative fee and the trustee surcharge in installments. Filing a petition under chapter 7 "automatically stays" (stops) most collection actions against the debtor or the debtor's property. Between 21 and 40 days after the petition is filed, the case trustee (described below) will hold a meeting of creditors.
If the debtor's income is less than 150% of the poverty level (as defined in the Bankruptcy Code), and the debtor is unable to pay the chapter 7 fees even in installments, the court may waive the requirement that the fees be paid. The Bankruptcy Code allows an individual debtor (4) to protect some property from the claims of creditors because it is exempt under federal bankruptcy law or under the laws of the debtor's home state. The debtor should consult an attorney to determine the exemptions available in the state where the debtor lives. The bankruptcy clerk gives notice of the bankruptcy case to all creditors whose names and addresses are provided by the debtor. trustee or bankruptcy administrator (5) schedules the meeting at a place that does not have regular U. trustee or bankruptcy administrator staffing, the meeting may be held no more than 60 days after the order for relief.
In most cases, unless a party in interest files a complaint objecting to the discharge or a motion to extend the time to object, the bankruptcy court will issue a discharge order relatively early in the case – generally, 60 to 90 days after the date first set for the meeting of creditors.
If a husband and wife have filed a joint petition, they both must attend the creditors' meeting and answer questions. In order to preserve their independent judgment, bankruptcy judges are prohibited from attending the meeting of creditors. Generally, excluding cases that are dismissed or converted, individual debtors receive a discharge in more than 99 percent of chapter 7 cases.
Debtors should be aware that failure to pay these fees may result in dismissal of the case.