Chapter 7 Bankruptcy
This Chapter 7 Bankruptcy information contained herein is specific to cases filed in the Middle District of Florida, Orlando Division, and reflect the experiences of this attorney. This basic information about Chapter 7 bankruptcy should assist you in understanding the course of events that occur when you file a Chapter 7 bankruptcy in Orlando. Most important, the information on this website is not all you need to know to file Chapter 7 bankruptcy.
Chapter 7 bankruptcy is designed to “wipe clean” or discharge your unsecured debts after you have liquidated and paid to your creditors all of your non-exempt assets. Certain unsecured debts cannot be discharged in Chapter 7. Chapter 7 bankruptcy has no effect, good or bad, upon secured debts.
Who Can File Chapter 7 Bankruptcy in Florida?
A permanent resident of Florida can file bankruptcy in a Florida bankruptcy court. Florida has three bankruptcy districts (Southern District, Middle District, and Northern District), and each of Florida’s counties is assigned to one of the three bankruptcy districts. You must file bankruptcy in the district where you reside. The Middle District has three separate divisions: Jacksonville, Orlando, and Tampa/Fort Meyers. If you reside anywhere in the Middle District you may file bankruptcy in any of the three divisions. For example, a resident of the Tampa or the Jacksonville Division can choose to file in the Orlando Division. Bankruptcy procedure is the same regardless of where you file your petition.
An important concept in both Chapter 7 and Chapter 13 bankruptcy is “exemptions” or “exempt property.” When you file a Chapter 7 bankruptcy, the Chapter 7 Trustee takes all of your “non-exempt” property and sells it for the benefit of your unsecured creditors. The Trustee cannot take your exempt property and you may keep all of your exempt property regardless of its value and amount. What property is “exempt” and what property is “non-exempt” depends on the exemption laws of the applicable state. Each state has its own exemptions for bankruptcy purposes. Forida has liberal bankruptcy exemptions for some assets, including an unlimited homestead exemption (in most cases) and limited exemptions for other assets. Only Florida residents are eligible for Florida exemptions.
Just because you are a Florida resident when you file for bankruptcy does not mean you are entitled to Florida exemptions in bankruptcy. Therefore, before you file bankruptcy you and your bankruptcy attorney must ascertain which state laws will determine your exempt assets. The state exemption law applicable to your bankruptcy is determined by the state in which you have been domiciled for the 730 days (two years) immediately preceding your filing date. If you have not been a permanent resident of Florida for the two-year period immediately preceding your bankruptcy, then your bankruptcy exemptions will be those allowed by the state in which you were domiciled for 180 days immediately preceding the two year period, or the state in which you were domiciled for the longer portion of such 180-day period.
Otherwise stated, a person filing bankruptcy in Florida today is eligible for the property exemptions he could have claimed if he had filed two years ago. If this person was a Florida resident two years ago he claims Florida exemptions today; if two years ago he was a resident of a different state then he is entitled to the exemptions of the state of his prior residence (or federal exemptions if that state has residency requirements for use of its exemptions).
Consider a person who sells his residence in Georgia for $100,000 and moves to Florida in January. In March of that year he purchases a Florida homestead for $100,000. The person gets a Florida drivers license and registers to vote in Florida. In March of the following year, 14 months after becoming a Florida resident, the same person loses his job and files bankruptcy. Under the new bankruptcy law, Georgia’s relatively limited exemption laws would apply to this bankruptcy, and the debtor would not have the benefit of Florida homestead protection.
In reality, the laws about bankruptcy exemptions are much more complicated than the example above. For example, some debtors will not qualify for the exemptions of any state and must use default federal bankruptcy exemptions. Before you file bankruptcy in Florida you and your bankruptcy attorney should discuss where you have resided during the past few years and should discuss whether Florida bankruptcy exemptions would apply in your case. In many cases, the state where you moved from will provide better bankruptcy exemptions than will Florida law.
Bankruptcy Terms and Definitions
Means Test: the means test is a formula established by Congress to determine who may be eligible to file Chapter 7 bankruptcy. People under their state’s median income and people whose debts are primarily not consumer debts are exempt from means test qualification.
Secured or Unsecured Debts. The bankruptcy petition asks you to list secured debts separately from unsecured debts. Unsecured debts include personal loans and credit cards issued by banks, such as Visa, MasterCard, American Express, or Discover, and other credit cards used to purchase consumable items. Vehicle leases, medical bills, and personal loans are also unsecured debts. Secured debts include those debts where the creditor has a security interest in your property to guarantee payment. Examples of secured debts include mortgages, car loans, loans from finance companies (usually secured by household items), furniture, computers or electronics. If you purchased store goods using a store credit card, such as a card from Rooms to Go, Best Buy, etc., the store probably has a security interest in certain items purchased, which makes the store a secured creditor.
Secured Property. After filing a Chapter 7 bankruptcy, you will have to choose to either reaffirm or redeem secured debts or surrender the secured items to the creditor. You are entitled to keep any secured property as long as you continue to pay the loan for that property in a timely manner. If, however, you elect to surrender secured property, the secured creditor may not thereafter recover any money from you personally on account of that debt. Some mortgage companies recently have required borrowers to sign cross-collateralization agreements by which the mortgage borrowers pledge bank accounts and other financial instruments to secure their mortgage. A cross-collateralization clause allows the mortgage lender to take money in your financial accounts to pay delinquent mortgage payments. If you are unsure whether you pledged financial accounts to your mortgage lender, you should review the papers you signed when you got your mortgage and/or when you opened your account. You may want to move your money to a new bank before defaulting on a mortgage loan.
The Bankruptcy Estate: your bankruptcy estate refers to your non-exempt assets that are subject to administration by the bankruptcy trustee. Exempt assets, such as your homestead and IRA, are not part of your bankruptcy estate.
Reaffirmation Agreements. You must file a reaffirmation agreement for all secured personal property you want to retain within 60 days of the first scheduled meeting with the trustee (the meeting of creditors or 341 meeting). If you do not sign the reaffirmation agreement or redeem the property within 60 days, the automatic stay is lifted as to that property and the creditor is permitted to take all legal action allowable under the law to repossess the property. Signing a reaffirmation agreement means that you will be personally liable to pay the debts after your bankruptcy is over.
Your attorney must sign your reaffirmation agreement if you have sufficient disposable income at the time of the filing of your bankruptcy case to pay the secured debt. The attorney may choose not to sign your reaffirmation agreement if you have negative disposable income at the time your case is filed or if he believes there is a presumption of undue hardship. If your attorney does not “approve” reaffirmation, you must prepare and sign a Reaffirmation Agreement Explanation explaining why you now have the financial ability to pay a reaffirmed debt. The bankruptcy judge will review your explanation and either deny or approve the reaffirmation. The bankruptcy judge will deny reaffirmation if he believes that reaffirmation is not in your best interest for a “fresh start.”
If the reaffirmation is denied you still may be able to keep your property if payments are current, or you could request a hearing with the judge. If the court refuses to approve your reaffirmation many creditors will let you keep your property if maintain current payments. (A creditor usually will not provide a reaffirmation agreement if you are delinquent in your payments.)
The Automatic Stay: the bankruptcy stay is the bankruptcy tool that stops creditors from bothering you after you file bankruptcy. Filing bankruptcy changes in many ways how you deal with your creditors.
Executory Contracts. An executory contract is a technical legal term referring to a contractual agreement in which both parties are obligated to do something in consideration for a benefit (such as a car lease or a residential lease). The most common example is a lease agreement for a car or a residence. Executory contracts do not include “at will” contracts such as an employment agreement or a personal service contract such as an agreement that can be fulfilled by efforts or appearance of a particular individual.
Chapter 7 bankruptcy permits the debtor, or the trustee, to assume or reject an executory contract. A debtor has to decide what to do about an executory contract before the court issues a bankruptcy discharge which usually happens about 90 days after filing. The executory contract law is complicated. Here are some of the basic things a debtor should understand about executory contract, using a car lease as an example.
If the debtor rejects the car lease or other executory contract he surrenders the car to the leasing company and has no further liability. If the debtor wants to assume the lease the debtor must make current payments at least until he exercises the assumption option. The debtor and creditor must sign the contract assumption, but the assumption does not require court action.
After assumption the debtor can keep the property as long as he makes lease payments. If the debtor subsequently defaults in lease payments the leasing company can take back the car. Assumption of executory contract is not a reaffirmation of the lease, so the leasing company may not sue the debtor for the balance of payments due under the lease following default.
Redemption. Bankruptcy also gives you the option to “redeem” secured personal property such as furniture, computers, automobiles, or other property purchased on credit and subject to a lien in favor of the lender. Redemption means purchasing the property from the secured lender at its current fair market value considering its age and condition. When the fair market value is less than the amount due under the loan, redemption can be financially beneficial.
Student Loans. Student loans are not dischargeable unless you can show that your loan payments impose “undue hardship.” In order to eliminate your student loans under the “undue hardship exception” you must file a separate motion with the bankruptcy court, and you must appear before the bankruptcy judge with proof of your hardship. As a practical matter, it is very difficult to demonstrate undue hardship unless you are physically unable to work.
Contingent and Disputed Liabilities. Make certain you provide your attorney information about all liabilities, no matter how remote. List any claim that anyone might have against you even if the claim has not yet matured. If you are a co-debtor on a note, have personally guaranteed corporate or other debt, or are secondarily liable on a mortgage that has been assumed by a purchaser, the debt should be listed along with a brief explanation of the liability. Disputed debts and liabilities should also be listed. If you have ever had a home mortgage that was insured by a governmental agency (such as the VA), be sure to list that agency as a contingent creditor. This should be done even where someone purchased the property and assumed the mortgage since they might default and the VA could decide to pursue a claim.
Bankruptcy Discharge: the discharge is the legal process that wipes out your legal liability to your creditors. Creditors who have been discharged in bankruptcy can never again try to collect debts that you incurred prior to filing bankruptcy.
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Florida Chapter 13 Basics
Chapter 13 bankruptcy essentially is a court supervised payment plan whereby you pay your unsecured creditors what you can afford to pay based upon your family income and your reasonable family expenses. Chapter 13 bankruptcy has two basic requirements: first, you must pay through your Chapter 13 bankruptcy plan to your unsecured creditors all of your disposable family income until your creditors are paid in full or for five years, whichever comes first, and second, you must pay your unsecured creditors at least as much as they would receive from your non-exempt property if you filed a Chapter 7 bankruptcy.
Chapter 13 has certain advantages over a Chapter 7 bankruptcy. For example, Chapter 13 bankruptcy permits debtors to modify or eliminate some secured debts. Specifically, Chapter 13 will stop a foreclosure so that you can catch up past due mortgage payments. Unsecured second mortgage liens can be eliminated through a successful Chapter 13. Also, Chapter 13 permits discharge of some unsecured debts not dischargeable in a Chapter 7.
You can file Chapter 13 in Florida bankruptcy court only if you otherwise qualify to file bankruptcy in Florida. Chapter 13 has debt limits of $360,475 for unsecured debts and $1,081.400 for secured debts. Unsecured debts include personal loans, medical bills, and credit cards issued by banks (such as Visa, MasterCard, American Express, or Discover) and other credit cards used to purchase consumable items such as clothing, food, vacations, etc. Secured debts include those debts where the creditor has a security interest in your property to guarantee payment. Examples of secured debts include mortgages, car loan, loans from finance companies (usually secured by household items), furniture, computers or electronics. If you purchased store goods using a store credit card, such as a card from Rooms to Go, Best Buy, etc., the store probably has a security interest in certain items purchased, which makes the store a secured creditor.
Chapter 13 Bankruptcy Procedures
The Automatic Stay/Suggestion of Bankruptcy. The automatic stay commences immediately upon the filing of the Chapter 13 bankruptcy petition. The stay acts like a shield between you and your creditors during the Chapter 13 bankruptcy. The stay prohibits the commencement or continuation of creditors’ judicial proceedings against you as well as all collection efforts. The Court will not lift the stay if you are a defendant in a foreclosure and are making mortgage payments through your Chapter 13 Plan.
If you are surrendering the property, the lender may be able to have the stay lifted so it can proceed with foreclosure. Chapter 13 bankruptcy permits you to stop foreclosure to catch up on past due mortgage payments. The court will not lift the stay if you are using Chapter 13 bankruptcy to reinstate a mortgage or to strip off a second mortgage.
Your bankruptcy attorney needs to file a Suggestion of Bankruptcy in pending civil cases, so it is important that you provide your bankruptcy attorney a copy of foreclosure papers and any other lawsuits you have received. Also provide the name and address of the creditor’s attorney. The bankruptcy attorney’s filing of a Suggestion of Bankruptcy does not mean that your bankruptcy attorney represents you in that case.
Motion for Relief From Stay is a Motion filed by secured creditors who want to pursue foreclosure of a delinquent secured loan. These Motions are not typically filed in Chapter 13 cases because secured creditors are paid through the Plan. In the event a secured creditor does file a Motion for Relief From Stay these Motions are typically denied as long as the creditor is adequately provided for in the Plan and as long as your payments under the Plan are current.
Handling Your Creditors After Filing. The Court mails the “341 Notice” to your creditors approximately one week after the petition is filed at the address you provided. If a creditor contacts you after you have received the 341 notice, advise them that you have filed bankruptcy, give them your case number. Ask that they no longer contact you as is stated in the 341 Notice. If you receive any bills after filing, you should mail a copy of the 341 Notice to the creditor with the bill.
If a creditor continues to call you or write to you after you have advised them of your Chapter 13 bankruptcy case number and filing date, make a record of the creditor’s contact. Keep a log of unauthorized creditor contacts after your Chapter 13 bankruptcy filing. If you have a written log or other evidence that a particular creditor has contacted you repeatedly, you should call your bankruptcy attorney.
Role of Trustee: The role of the Chapter 13 trustee is different from that of a Chapter 7 trustee. In Chapter 7, the trustee’s job is to find and assemble the debtor’s non-exempt assets which become part of the Chapter 7 bankruptcy estate. The Chapter 7 trustee also may object to the debtor’s claimed exemption of assets. In Chapter 13, the trustees primary role is to supervise the debtor’s preparation and approval of his Chapter 13 plan . After a bankruptcy plan is approved by the court the Chapter 13 trustee collects the debtor’s plan payments and distributes the money among the debtor’s creditor pursuant to the terms of the approved bankruptcy plan.
Chapter 13 and Secured Debts. The Chapter 13 bankruptcy petition requires a list of your secured debts separately from unsecured debts. Secured debts will be paid through your Chapter 13 Plan unless you surrender the secured asset. You must provide your bankruptcy attorney complete information about your secured debts including each creditor’s name and address. In a Chapter 13, you have the option to surrender collateral (such as a house or car) securing a secured loan. You may be able to pay some secured debts outside the plan if (a) the account is current and (b) the debt is paid by automatic deduction initiated by the creditor (not through bill pay) and has been paid that way for at least six (6) months.
Federal Income Taxes. Some federal income taxes are discharge able in Chapter 13. A discussion of income taxes and bankruptcy is found elsewhere on this website. Income taxes that are not dischargeable in Chapter 13 are considered a priority debt and must be paid in full during your Chapter 13 bankruptcy. One advantage of filing Chapter 13 bankruptcy is that income taxes owed the IRS can be paid without further penalty or interest which would otherwise accrue outside bankruptcy. Your bankruptcy attorney may not practice tax law. If you are unsure when certain income taxes were due and payable you must contact the IRS, your tax advisor, or a tax attorney.
Tax Returns & Refunds. In a Chapter 13 bankruptcy, you must timely file all income tax returns due before and after the filing date. Failure to file any tax return is grounds for dismissal. If you need an extension of time, your attorney must file a motion and submit an order to the Court before the date the tax return is due (usually April 15). Income tax refunds are assets and must be surrendered to the Chapter 13 trustee during your Chapter 13 plan. The Chapter 13 may permit you retain a tax refund if you can demonstrate a need, such as a required medical procedure, paying property taxes, unexpected home or vehicle repairs, etc. Before applying to keep your refund, you must provide the Chapter 13 trustee with a copy of your tax return, the tax refund check, and a request form (available from your attorney).
New Debts. Chapter 13 Debtors may not incur any new debt after filing the bankruptcy Petition, including federal income taxes and property taxes, which must be paid when due. If you must incur debt to buy something, such as a replacement car, you must ask the Trustee for permission in advance. Usually, the Trustee will approve new cars so long as the car payment is not greater than the payments on your old car.
Interest Rate On Car Loan. Chapter 13 bankruptcy may permit you to lower the interest rate on your car loan to current market rate. You can object to a claim filed by your car lender if the claim includes an interest rate above the applicable market rate.
Bankruptcy and Employment. It is illegal for your current employer to discriminate against you in any way because you have filed bankruptcy. A private employer may refuse legally to hire people who have filed bankruptcy. Government employers may not discriminate against bankruptcy debtors in hiring.
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Chapter 11 Bankruptcy
Chapter 11 bankruptcy is primarily filed to reorganize an operating business. A typical Chapter 11 business debtor is one that is generating money but is in financial distress because of bad management decisions including decisions to incur debt payments above net operating revenues. Chapter 11 is designed to give a business the chance to restructure some of its secured debt and to discount unsecured debt to a level where the business can grow out of financial distress. An individual debtor can also file a Chapter 11 to reorganize their personal financial situation when their debt levels exceed those allowed for a Chapter 13 reorganization.
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Dealing With Creditors
Many people are subject to creditor collection and harassment prior to filing bankruptcy, and in many cases the creditors’ collection efforts are what drives people to seek bankruptcy protection. Once you decide to file Chapter 7 bankruptcy the interaction between you and your unsecured creditors will change.
Handling Creditors Before Filing. If a creditor calls you after your initial appointment and payment of your retainer, tell the creditor that you have retained an attorney to file bankruptcy and give them your bankruptcy attorney’s name and phone number.
Use of Credit Cards. Do not use any credit cards after your initial consultation with your bankruptcy attorney or once you have decided to file bankruptcy. If you have charges or cash advances in the months preceding filing bankruptcy, the creditor may file an adversary complaint alleging that you incurred recent charges with fraudulent intent and without the intent and/or ability to repay these debts. Such recent and abusive credit card debts may not be discharged in your Chapter 7 bankruptcy.
Unfair Debt Collection. The Federal Fair Debt Collection Practices Act (the “Act”) (prohibits unfair collection of consumer debts. If you can prove that your creditors intentionally and repeatedly violated the Act before or after you retained your bankruptcy attorney, you may be able to recover damages. The following is a summary of a few prohibited debt collection practices:
Calling you before 8 a.m. or after 9 p.m. local time.
Contacting you directly after you told the creditor you retained an attorney to represent you.
Telling your employer or co-worker that you owe money to the creditor.
Calling you at work after you have told them not to.
Intentional and continuous harassment or abuse in connection with a debt.
A creditor’s representative falsely representing that he is an attorney when in fact he is not licensed to practice law.
Threatening you with arrest or imprisonment for failing to pay a debt.
Communicating with anyone other than you our your spouse about your debt.
Debt collection laws are complicated, and your right to recovery will depend on your specific facts and your evidence. Contact your bankruptcy attorney if you believe you can prove one of your creditors intentionally and repeatedly engaged in unfair collection practices. A copy of the complete Act is available at http://www.ftc.gov under Consumer Information.
Handling Your Creditors After Filing. The Court mails the “341 Notice” to your creditors approximately one week after the petition is filed at the address you provided.
If a creditor contacts you after you have received the 341 notice, advise them that you have filed bankruptcy, give them your case number, and ask that they no longer contact you as is stated in the 341 Notice. If you receive any bills after filing, you should mail a copy of the 341 Notice to the creditor with the bill.
If a creditor continues to call you or write to you after you have advised them of your bankruptcy case number and filing date, make a record of the creditor’s contact including, if possible, the name of the person contacting you, and dates and times of contacts. You may want to keep a log of unauthorized creditor contacts after your bankruptcy filing. If you have a written log or other evidence that a particular creditor has contacted you repeatedly after notification you should call your attorney for assistance.
Get a Credit Report. You must obtain a recent credit report and furnish a copy to your bankruptcy attorney prior to filing bankruptcy. If you have recently been denied credit, you are entitled to a free credit report from the reporting agency. Instructions for obtaining this report should be on the letter you received denying credit. Also, a recent federal law gives you the right to obtain a free credit report once a year. You can obtain a free credit report from one or all of the primary credit reporting agencies at http://www.annualcreditreport.com.
Bankruptcy Questionnaire. The bankruptcy schedules that your attorney will prepare for you are based upon the information you provide your attorney. Your attorney will provide you a questionnaire for you to fill out so that the attorney can gather information needed to prepare a Chapter 7 bankruptcy. All information you furnish your attorney regarding your creditors must be complete and accurate. It is your responsibility to assure the accuracy of that information when you deliver the completed Questionnaire to your bankruptcy attorney. Your creditors who do not receive notice of your bankruptcy because of an incorrect address or account number might not be discharged (the elimination of the debt) and you would still owe them money.
You are required to list all creditors, including your mortgage company and auto loan or lease company. You may not pick and choose the creditors you list on your bankruptcy schedules and should include creditors who have either written off, charged off, or sold your debt to a collection agency or debt buyer. You should also provide the name and address of any creditor’s representative (attorney or collection agency).
Attorney Certification. The new bankruptcy law places additional duties on bankruptcy attorneys representing debtors in Chapter 7 bankruptcy cases. Your bankruptcy attorney must certify to the court that he or she has performed a reasonable investigation into circumstances giving rise to your bankruptcy, that your bankruptcy petition is well-grounded in fact, and the attorney has determined that your bankruptcy does not constitute an abusive filing. Also, the bankruptcy attorney must certify that, after reasonable inquiry, he or she has no knowledge that the information in your bankruptcy schedules is incorrect. These requirements increase the attorney’s duties and liability. Your bankruptcy lawyer will ask you to provide copies of your pay stubs, checking account statements, credit reports, tax returns, and other documents about your finances and assets.
Chapter 7 and Mortgage Modification. Most mortgage modifications are made under the government’s Home Affordable Modification Program (“HAMP”). The government’s HAMP Directives protect bankruptcy debtors. Chapter 7 bankruptcy does not diminish your rights to a HAMP mortgage modification. Borrowers in active Chapter 7 bankruptcy cases must be considered equally for HAMP modification upon request. Borrowers in the midst of a trial modification cannot be denied permanent modification because they file bankruptcy. Also, Chapter 7 filers do not have to reaffirm personal liability on their mortgage to be eligible for a permanent HAMP modification. You may continue efforts to modify your home mortgage after you begin the bankruptcy process
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Bankruptcy Procedures (Chapter 7 Example)
The Automatic Stay/Suggestion of Bankruptcy. The automatic stay commences immediately upon the filing of the bankruptcy petition. It acts like a shield between you and your creditors during the bankruptcy. The stay prohibits the commencement or continuation of creditors’ judicial proceedings against you as well as all collection efforts. Your bankruptcy attorney needs to file a Suggestion of Bankruptcy in pending civil cases. so it is important that you provide your bankruptcy attorney a copy of any lawsuits you have received and the name and address of the creditor’s attorney. You may want to call your bankruptcy attorney’s office after you receive your 341 Notice to confirm that a Suggestion has been filed if you do not receive a copy. In most cases, the bankruptcy attorney’s filing of a Suggestion of Bankruptcy in your state court case does not mean that your bankruptcy attorney represents you in that case.
Relief from Stay. In Chapter 7 bankruptcy cases mortgage creditors typically file a Motion for Relief from the Automatic Stay so that they are able to foreclose on your secured property in the event you do not pay your secured debt in a timely manner. The bankruptcy court will usually grant this motion, but that does not mean that the creditor can take your property. The creditor can take your property only if you do not pay the loan in a timely manner under the terms of your mortgage or loan contract with the creditor, and only after the creditor forecloses its mortgage or lien in state court. If you are in default on an auto loan, the creditor can repossess the vehicle without filing to have the stay lifted if it has been more than 60 days since the originally scheduled creditors meeting and you have not reaffirmed the debt. When a secured creditor files a Motion for Relief From Stay the court will enter an Order granting the Motion once the objection period has passed. If an objection is filed, the Court will schedule a hearing.
The Chapter 7 Trustee. A Trustee is randomly appointed by the Court immediately upon the filing of a Chapter 7 petition. The Chapter 7 Trustee is usually a private attorney or CPA, and he is compensated primarily by a percentage of the non-exempt assets he is able to collect from you and distribute to your creditors. In Chapter 7 one job of the Trustee is to gather all of your non-exempt assets, sell those assets, and distribute the proceeds among all your unsecured creditors.
Meeting Your Trustee. Your meeting with your Chapter 7 trustee (the “creditors meeting” or “341 meeting”) is held in a conference room, not the courtroom. The federal bankruptcy judge is prohibited by law from being there. Typically this meeting will last about ten to fifteen minutes. The trustee will ask you questions about the information contained on your petition and schedules. Your attorney can tell you what questions to anticipate. The U.S. Trustee (a different trustee) sometimes attends these meetings to discuss issues with your means test computation.
You are required to attend the creditors meeting with the bankruptcy trustee (if filing jointly, both husband and wife must attend). Your bankruptcy attorney will accompany you and represent you at the meeting. As a practical matter very few, if any, unsecured creditors attend. The Chapter 7 Trustee’s job is to represent all creditors whether or not a creditor attends the meeting of creditors.
At the 341 meeting the Chapter 7 bankruptcy trustee will ask you questions, but he will not interrogate you, cross-examine you, or threaten you. The trustee may ask you why you filed bankruptcy and ask questions about your assets and your sources of income. The trustee often will inquire about information contained in your bankruptcy petition and schedules. As stated above, the U.S. Trustee may ask questions about your income and expenses to make sure you qualify for Chapter 7 bankruptcy and that your bankruptcy is not an abusive filing.
Creditors meetings are scheduled by the Trustee based on the Trustee’s schedule. Your bankruptcy attorney is not able to request a particular meeting date or time. If you are unable to attend the 341 Meeting you should notify your bankruptcy attorney at least one week in advance so your attorney can contact the Trustee for a continuance. The Trustee will schedule a “make-up” meeting approximately two weeks after the first date. If you do not attend the second meeting, the Trustee will move to have your case dismissed.
Trustee’s Objection to Exemptions. The Chapter 7 bankruptcy trustee has 30 days after the conclusion of the creditors meeting to object to any exemption of property claimed on your bankruptcy petition. Absent trustee objection, all property listed as exempt, including your homestead exemption, is exempted in bankruptcy and is not part of your bankruptcy estate and are therefore protected. If the trustee objection to a claimed exemption, the court will set a hearing to rule on your exemption. If there is no objection to your exemptions within 30 days after the conclusion your creditors meeting, you probably can do what you want with assets claimed as exempt on your petition. However, prior to disposing of or transferring any property (including exempt property), you should consult your bankruptcy attorney.
Transferring Property After Filing. Immediately upon the filing of a bankruptcy petition, a legal “estate” is created by law which consists of everything you own at the time you filed bankruptcy. This is called the “bankruptcy estate.” You should never sell, give away, or transfer any of your real or personal property which is part of your bankruptcy estate either immediately before or after the filing of your petition without checking with your bankruptcy attorney. You may transfer or sell property you claimed as exempt property on your bankruptcy petition if there is no objection made to the exemption within 30 days after your creditors meeting.
Creditor Adversary Claim. The majority of Chapter 7 cases do not involve adversary matters; however, if a creditor believes its claim should not be discharged, it may file, or threaten to file, an Adversary Case against you during the bankruptcy proceeding. The most common grounds for the filing an adversary case is “fraud.” Fraud in this context is not criminal, but it means that you allegedly have abused the bankruptcy process. For example, if you used credit to buy property or take cash advances prior to filing bankruptcy when you were insolvent, did not anticipate repaying the debt, or planned to file bankruptcy, this could be grounds to set aside a discharge of that debt for fraud, and the creditor may have a basis to file an adversary case.
Trustee Adversary Claim. The Chapter 7 Trustee may also file an adversary case to recover non-exempt property. A Trustee may also file a motion to value property which he believes you have undervalued in order to exempt under your $1,000 personal property exemption. If the Trustee convinces the court to increase the property value, he can then recover any of your property in excess of your exemption limit.
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