As
you file a chapter seven bankruptcy your 341 hearing will be set and you must
attend along with your lawyer roughly thirty days after. Typically, you're
filing a chapter seven bankruptcy to dismiss debt since you can't afford to pay
it back. You still have to pay off debts if a creditor holds a lien on
something you prefer to hold on to. These are known as secured debts when the
creditors put liens on your belongings as collateral. Perfect models of this
type of debt is your home mortgage or your car loan. If you would like to hold
on to these belongings you must pay for them. Also, you must be up-to-date on
the payments at the time you file bankruptcy or the bank could decide to take
possession of these items.
Typically, here is how it works, you file your chapter 7 bankruptcy, then you
will attend the hearing and the bankruptcy trustee asks questions. Rarely are
any creditors there. Your lawyer is there to make sure you don’t stumble and to
clarify anything that isn’t clear at the end. Also, he will probably make notes
of anything that needs to be obtained for the trustee. Different bankruptcy
courts operate differently and different bankruptcy trustees have different
expectations of you. Your attorney should know these differences and be able to
tell you what to expect. The trustees also ask for other information at the
hearing on a case-by-case basis. In NC the bankruptcy trustees require photo ID
and your social security card be shown.
The chapter 7 bankruptcy trustee has 4 basic jobs: (1) to make sure that you
filed all your paperwork correctly and completely; (2) to confirm that the
budget you filed is real and shows that you and your family have no disposable
income after you pay your basic, ordinary average monthly living expenses; (3)
to confirm that your family’s “Current Monthly Income”, or CMI is less than the
median family income of a family of your size in the county and state in which
you live.
The CMI is a made up number Congress came up with under the new bankruptcy law
in 2005, and which consists of the gross income of and all funds of any type
received by everyone living in your house for the six months immediately prior
to the month in which you filed bankruptcy (except for some types of income).
This number is then divided by 6 and multiplied by 12.
The median family income is a number which comes from IRS statistical records.
If you do your paperwork correctly, and you have no money left after you pay
your ordinary and reasonable living expenses; and your household’s current
monthly income is less than the median family income for a family of your size,
THEN you qualify for chapter 7 bankruptcy and the bankruptcy trustee will say
so. Of course, your file is also being reviewed by the US Trustee to see if it
complies, but this rarely is a problem for those people who have experienced
attorneys.
Finally, the chapter 7 bankruptcy trustee’s fourth job is to see if those
people who qualify for chapter 7 bankruptcy have any assets he can sell. This
rarely occurs because everyone has a certain dollar amount of certain types of
items that are protected from bankruptcy trustees. These are called exemptions
and are discussed herein (Please see the “Protecting your Assets” section).
Most people filing chapter 7 bankruptcy do not have assets which are worth much
more than their exemptions. Your attorney should be able to advise you
regarding how to protect your assets. If you do not claim the correct
exemptions, your assets may be sold.
Every
experienced bankruptcy attorney and bankruptcy trustee can recall cases where
people without lawyers or people with inexperienced lawyers lost assets that
could have been protected. Mr. Hardy has done thousands of bankruptcies over 20
years of law practice. Mr. Hardy can give you a very accurate and experienced
opinion after your free evaluation whether you will have any assets that might
possibly be subject to being sold by the court. It is very seldom that any of
Mr. Hardy’s clients have assets sold that they do not want to voluntarily surrender
(such as a home or car you do not want to pay for).
If you do have assets that the trustee feels
are not “exempt” from being sold by the court, then you can still make
arrangements to keep it. Sometimes you can pay the trustee some money to cover
the value of that asset. The bankruptcy court values property at its fair
market value (how much someone else with no respect for your property would pay
to take it away). This money if you cannot pay it immediately can be paid over
time, as much as 6-24 months. OR if you cannot agree on a settlement with the
trustee (or the amount of money is too large to pay over 6-24 months), then you
can convert to a Chapter 13 bankruptcy
and
make payments through a Ch. 13 payment plan over 36-57 months. (see “Protecting
your Assets”)
If the bankruptcy trustee does not want your assets, he usually will say so at
the end of the hearing in NC. After the 341 meeting of creditors, normally you
only need to wait approximately 60 days after that 341 meeting of creditors, or
hearing, for the deadline for creditors to object to their particular debt’s
being discharged or wiped out. Creditors cannot object to discharge just
because they are irritated. They have to have a legal reason, such as you lied
to them about something important like your income in order to qualify for the
loan they gave you; or you borrowed money from them within 90 days before you
filed bankruptcy. Creditors have to sue you in the bankruptcy court to object
to discharge. If they do not then, even if they could have complained and won,
they no longer can if they miss the deadline.
Usually within a month after the deadline to object to discharge passes, you
get your order discharging the debts. This is the piece of paper, or court
order, signed by a bankruptcy judge, which wipes out or discharges your debts.
What does it say and do? It does not tell anyone what debts are discharged.
Typically, it merely says that the debtor is discharged of the obligation to
pay all dischargeable debts and the bankruptcy case is closed. The attorney and
debtor have to know which of the debtor’s debts are actually dischargeable.
Creditors need to understand this, too, because if a creditor tries to collect
a dischargeable debt, then you can sue the creditor and it can be a very
expensive mistake for them and profitable for you.
What is a dischargeable debt? The bankruptcy code does not specifically itemize
them. Instead, the bankruptcy code says what debts are not discharged, with the
presumption being that all debts are discharged unless the bankruptcy law says
they are not. Some examples of debts that specifically are not discharged are:
some taxes, alimony and child support, most school loans, debts incurred
through fraud, and others. After your free evaluation, Mr. Hardy can tell you
which of your debts are dischargeable.
In most chapter 7 bankruptcy
cases debtors discharge all
of their debts and keep paying the creditors they want to keep paying, which
debts usually are the mortgage on the house and the car loan(s).
