What is Chapter 7 bankruptcy?
Chapter 7 bankruptcy is a liquidation proceeding. The debtor turns over all nonexempt property to the bankruptcy trustee, who then converts it to cash to pay the creditors. The debtor receives a discharge (or forgiveness) of all debts approved by the court.
WHEN WOULD ONE CHOOSE CHAPTER 7 BANKRUPTCY?
The most common reasons for consumer bankruptcy are: Unemployment; large medical expenses; seriously over extended credit; marital problems and other large unexpected expenses.
WILL CHAPTER 7 STOP BILL COLLECTORS FROM CALLING?
One of the major benefits of filing for protection under Chapter 7 is that many creditors’ collection efforts for payment is halted and foreclosure is stopped.
HOW LONG WILL IT TAKE AFTER I FILE IN ORDER FOR THE CREDITORS TO STOP CALLING?
Once given notice that you have filed for bankruptcy protection, a creditor or bill collector must stop all efforts to collect the debt. After a bankruptcy is filed, the court notifies all creditors listed in your schedules by mail, which typically takes a couple of weeks. Your attorney can inform the creditor immediately if needed. If a creditor continues to attempt to collect a debt, even after given notice of the bankruptcy, they may be liable for court penalties and attorney fees for their conduct.
WILL BANKRUPTCY AFFECT MY JOB OR MUST I INFORM MY EMPLOYER?
No. Bankruptcy laws prohibit discrimination based upon a debtor filing for protection under the bankruptcy laws. Under normal circumstances, unless your employer is a creditor, your employer will not know.
WHAT HAPPENS TO MY PERSONAL PROPERTY, REAL PROPERTY AND OTHER ASSETS?
Once the bankruptcy is filed, all the property of the debtor at the time of the filing and certain future property, becomes the property of the bankruptcy estate. This means that the bankruptcy trustee will take control of this property for purposes of paying the creditors.
HOWEVER, there is certain property which the debtor will be able to keep, which means it is either excluded or exempt. Which assets or property that will be exempt is determined upon your situation, your income and the state law. The best way to determine which property to keep requires a detailed analysis of your situation by a professional attorney.
CAN I KEEP MY HOUSE AFTER BANKRUPTCY?
Depending upon your circumstances, you may exempt (or able to keep) up to $100,000 in equity. When calculating your equity, use a lower amount which would reflect the price of a forced liquidation as opposed to the ideal selling conditions to find the value for your home. Once you know the value, subtract the amount owed on the loan, plus selling and transfer costs from the value. This will be the equity. You may be able to keep up to $100,000 in equity. Unfortunately, liquidated properties are often valued less than what we like to think the property is worth.
CAN I KEEP MY CAR AFTER BANKRUPTCY?
In most situations, courts understand that you need a car to work to get back on your feet. However, if you own vintage or expensive cars worth many thousands of dollars, it is more than likely you will probably not to be able to keep them. If, on the other hand, you have a car worth $10,000 and you owe $8000 on it, you will most likely keep it, but you must still make the payments on your car loan. This is called reaffirming (or keeping) the debt. In some cases, your attorney or representative can also re-negotiate the loan or the lease to get a more favorable deal for you.
WHAT YOU SHOULD NOT DO IF YOU ARE THINKING ABOUT BANKRUPTCY:
Because there are several areas related to this question, you should consult your attorney. In particular there are three items worth mentioning.
- Bankruptcy law states certain luxury purchases over $1000 within 60 days of filing bankruptcy are considered non-dischargeable (not forgivable).
- Cash advances totaling $1000 within 60 days of filing bankruptcy are also considered non-dischargeable.
- Debts presented with false financial statements are non-dischargeable.
WHAT IS MY FIRST STEP?
You want to make sure you are well informed. A professional Utah attorney can easily educate you on the steps that need to be taken and can help you make the best decisions that can positively impact you and your family.
