Law Offices of Beecher & Conniff

Beecher & Conniff

Known as a "Fresh Start" or "Straight" bankruptcy, Chapter 7 bankruptcy allows a person ( not corporations) to eliminate most or all of his or her debt, such as medical bills, personal loans and most credit card charges, while being allowed to keep certain property (assets which do not exceed certain limits called "exemptions").

In most Chapter 7 cases, all of an individual's property will be exempt (meaning the asset will remain his or her property). However, property which is not exempt may be sold, with the money distributed to the creditors. With the increasing generous exemption laws available to most filers it is very rare for any property to be lost to the system. Over 95% of all cases result in a closing with no assets lost.

In most cases, an individual may keep their home or cars (secured debt), provided that they continue to make current payments and are up to date on the loan. It is very important if you own real estate that we have a comparative market analysis (CMA) performed to determine value before we file your case. The interpretation of the law changes since 2005 may permit us to "strip off" some junior mortgages where the value of the property has decreased below the debt owed to senior mortgages. Presently, this is available only in some Chapter 13 cases.

Chapter 7 does not eliminate:

Student loans, except extreme hardship cases
Debts for most taxes, although taxes more than 3 years old might be eliminated
Debts for alimony, maintenance or support
Debts for fines, penalties or criminal restitution
Debts for personal injuries caused by driving intoxicated or under the influence of drugs

Chapter 7 is the most commonly filed bankruptcy and can allow for a new financial start. More and more Americans find themselves struggling with debt they cannot control. This is more true after the global financial crisis that started in 2008. The recent financial meltdown of our financial markets, including the real estate and lending markets, has led to a record number of bankruptcy filings.

Frequently Asked Questions:

What is a discharge?
A Chapter 7 discharge is an order signed by the Bankruptcy Judge declaring all of your eligible debt to be extinguished forever. The Order of Discharge creates a permanent injunction against a creditor whose debt is discharged from attempting to collect the debt from you. The Order of Discharge is normally entered about 110 days after the Chapter 7 case is filed. Your attorney should discuss with you what debts cannot be discharged. A Chapter 11 or Chapter 13 discharge is usually not entered until the completion of plan payments.

What are exemptions?
Most assets owned by you have what is known as an exempt status. This means that you can protect the assets from the reach of creditors and the Chapter 7 Trustee. The exemption will not apply to a mortgage or lien voluntarily placed on the asset by the debtor. The availability of exemptions and how to properly and effectively claim them is something to be discussed with your attorney.

What is a reaffirmation?
Because most debt is discharged in bankruptcy, secured creditors may want you to sign a document known as a Reaffirmation Agreement. Signing this agreement results in you waiving your Chapter 7 discharge of this debt and agreeing to continue to make payments as called for by the original loan documents. This allows you to keep your home, car or furniture. The decision whether or not to reaffirm a debt is a serious one and needs to be discussed with your attorney so that all options are understood. If you stop paying on the secured asset after a Reaffirmation Agreement is signed, then the asset can be foreclosed or repossessed and a deficiency judgment obtained for the difference. If you change your mind and wish to terminate or rescind a Reaffirmation Agreement, then you have 60 days to file a recission agreement after a Chapter 7 reaffirmation is fully executed and filed with the Bankruptcy Clerk's office. You should consult your attorney before making any decisions regarding reaffirmation. In many cases we can negotiate more favorable terms for debts that are being reaffirmed, especially for automobiles whose value is far less than the debt.

What is redemption?
In Chapter 7, if an asset is secured to a lender, it may be purchased or redeemed from the creditor by paying its present market value in a lump sum. The balance of the debt will be discharged. An example would be furniture that has a depreciated value at the time of bankruptcy of $700.00 and the balance of the debt on the furniture is $2,000.00. The furniture can be redeemed for $700.00 and the $1,300.00 difference is discharged. The process of redeeming assets should be discussed with your attorney.

Are certain debts non-dischargeable?
Yes. The most common non-dischargeable debts are alimony, child support, certain property settlement agreements, certain income tax liabilities, business tax liability, Internal Revenue Service payroll tax (trust fund liability), and many student loans. In addition, certain debts created by fraud, embezzlement or conversion can be found to be non-dischargeable.

Do I have to list all of my creditors?
Yes. Bankruptcy law requires a full and complete disclosure of your debts. Bankruptcy schedules are signed under the penalty of perjury and you will be asked under oath at the meeting of creditors if all debts were disclosed.

What is the meeting of creditors and what happens?
The meeting of creditors is conducted by the Chapter 7 Trustee. You are questioned under oath concerning your assets and debts. Creditors who choose to attend the meeting either in person or through their attorney can ask questions concerning anything relevant to the case. As a practical matter, creditors rarely attend the meeting of creditors. It is mandatory for you to attend the meeting of creditors. Your attorney will accompany you to the meeting.

Can I transfer ownership of my home, car, boat, collectables, tools, etc. to someone else to keep those items out of bankruptcy?
No. Such transfers within one year of filing Chapter 7 bankruptcy will almost invariably be scrutinized very closely by the bankruptcy trustee and may be undone. You need to discuss these transfers with your attorney. Don't make any payments to relatives or "insiders" before you consult with an attorney.

Can creditors ask to have their debt held non-dischargeable?
Yes. Creditors have approximately 100 days after the filing of the Chapter 7 bankruptcy case to file a lawsuit asking that the debt be held non-dischargeable. Certain debts have no such time limitation for such actions. Objections to discharge happen very rarely and usually have their origin in some kind of bad conduct by filers.

How long does bankruptcy remain on my credit bureau report and can I obtain credit before that time period runs?
A Chapter 7 bankruptcy can be kept in the public records section of your credit bureau report for 10 years. It has been our experience that the credit industry will begin soliciting you for new credit before your case is even completed. Once your Chapter 7 discharge is entered, if certain income and employment conditions are met, market rate financing may be available. If certain conditions are met new automobile financing may be available.

Will my bankruptcy affect a co-signor on the debt?
Yes. The bankruptcy will not protect the non-filing co-signor. The creditor may continue to try to collect against the co-signor. Creditors have this right even if the bankruptcy is never filed. Additionally, the co-signor's credit bureau report may show that the joint debt was included in bankruptcy. These situations should be discussed with your attorney.

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