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Bankruptcy for Union Members, "Chapter 7"
- Categorized in: Union Resources
How Filing for Chapter 7 Bankruptcy helps:
Under the federal Bankruptcy Code, filing a petition for bankruptcy will "automatically stay" harassing collector calls, most wage garnishments, and the majority of other collection actions. While not necessarily permanent, this stay is meant to grant you a reprieve from collection actions until your bankruptcy case is decided.
Am I Eligible to file for Chapter 7 Bankruptcy?:
If your income is higher than your state's median income, you may be subject to a "means test." This test is meant to ensure that you are not abusing the protections offered under a Chapter 7 bankruptcy. Due to this test, it is critical that you obtain the representation of an experienced, quality bankruptcy attorney to represent your interests throughout your Chapter 7 action. If, during the "means test", the court determines that you are being "presumptively abusive" your action will either be converted to a Chapter 13 bankruptcy (with your permission), or it will be dismissed.
Chapter 7: How it Works
Following is an overview of the early course of a typical Chapter 7 bankruptcy case.
The Chapter 7 Petition and Filing Requirements
A chapter 7 case begins with the debtor filing a petition with the bankruptcy court (the 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 to the petition, in a chapter 7 bankruptcy case the debtor must also file with the court:
- Schedules of assets and liabilities;
- A schedule of current income and expenditures;
- A statement of financial affairs; and
- A schedule of executory contracts and unexpired leases.
Debtors must also provide the assigned case trustee with a copy of the tax return or transcripts for the most recent tax year as well as tax returns filed during the case (including tax returns for prior years that had not been filed when the case began).
- Individual debtors with primarily consumer debts have additional document filing requirements. They must file:
- A certificate of credit counseling and a copy of any debt repayment plan developed through credit counseling;
- Evidence of payment from employers, if any, received 60 days before filing;
- A statement of monthly net income and any anticipated increase in income or expenses after filing; and
- A record of any interest the debtor has in federal or state qualified education or tuition accounts.
A husband and wife may file a joint petition or individual petitions. Even if filing jointly, a husband and wife are subject to all the document filing requirements of individual debtors. (The Official Forms may be purchased at legal stationery stores or downloaded from the internet at http://www.uscourts.gov/bkforms/index.html.)
Fees and Payment Options
As of October 17, 2005, the courts must charge a $220 case filing fee, a $39 miscellaneous administrative fee, and a $15 trustee surcharge. Normally, the fees must be paid to the clerk of the court upon filing. With the court's permission, however, individual debtors may pay in installments. The number of installments is limited to four, and the debtor must make the final installment no later than 120 days after filing the petition. 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. Id. The debtor may also pay the $39 administrative fee and the $15 trustee surcharge in installments. If a joint petition is filed, only one filing fee, one administrative fee, and one trustee surcharge are charged. Debtors should be aware that failure to pay these fees may result in dismissal of the case.
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.
In order to complete the Official Bankruptcy Forms that make up the petition, statement of financial affairs, and schedules, the debtor must provide the following information:
- A list of all creditors and the amount and nature of their claims;
- The source, amount, and frequency of the debtor's income;
- A list of all of the debtor's property; and
- A detailed list of the debtor's monthly living expenses, i.e., food, clothing, shelter, utilities, taxes, transportation, medicine, etc.
Married individuals must gather this information for their spouse regardless of whether they are filing a joint petition, separate individual petitions, or even if only one spouse is filing. In a situation where only one spouse files, the income and expenses of the non-filing spouse is required so that the court, the trustee and creditors can evaluate the household's financial position.
The "Automatic Stay"
Filing a petition under chapter 7 "automatically stays" (stops) most collection actions against the debtor or the debtor's property. But filing the petition does not stay certain types of actions listed under the Bankruptcy Code, and the stay may be effective only for a short time in some situations. The stay arises by operation of law and requires no judicial action. As long as the stay is in effect, creditors generally may not initiate or continue lawsuits, wage garnishments, or even telephone calls demanding payments. The bankruptcy clerk gives notice of the bankruptcy case to all creditors whose names and addresses are provided by the debtor.
Meeting of Creditors: Within 20 to 40 days after you file your petition, the court-appointed trustee will hold a meeting of creditors. You must attend this meeting. If you have filed a joint bankruptcy petition with your spouse, you both must appear. During this meeting, your creditors will ask you questions regarding your financial situation. After this meeting, the trustee will advise the court on whether or not your case contains a presumption of abuse. If there is no presumption of abuse, you can expect a discharge order within 60 to 90 days after the meeting of creditors. (In some cases, the discharge order may take longer. If, for example, a creditor files a complaint objecting to the discharge.)
In addition to the "means test", a qualified bankruptcy attorney will assist you in compiling and filing the numerous documents the court requires during a bankruptcy case, including: a schedule of assets and liabilities, detailed information on your current income and expenses, a statement of your financial affairs, a schedule of contracts and unexpired leases, and a recent tax return.
Credit Counseling: Under the U.S. Bankruptcy an individual must receive credit counseling within 180 days before the filing of his or her petition to be eligible to be considered a debtor. Attorney Lander McLoyd will provide you the contact information for a credit counseling agency approved by the Bankruptcy Court.
Certificate of Credit Counseling: In addition, you will be required to turn in a certificate of credit counseling. You may also be required to turn in a copy of any debt repayment plan developed through such counseling, evidence of wages (if any) received in the 60 days prior to filing, information on your net income and any anticipated increases in income or expenses, and a record of any interest you may hold in qualified federal or state education or tuition accounts. (11 U.S.C. § 521) You must also provide a detailed list of all creditors and the amount and type of debt associated with each. Your attorney will assist you by ensuring that all necessary documentation is filed with your petition.
Schedule of Exempt Property: A schedule of exempt property must also accompany your petition. While the bankruptcy code is a federal code, and thus primarily the same from state to state, some states have additional legislation regarding exempt property. Ann Arbor bankruptcy attorney Lander McLoyd has over thirty years of legal experience, and is thoroughly versed in Michigan bankruptcy law. With Lander by your side, you can be assured that every item eligible for exemption will be claimed as such.
If you are an individual who desires a quick resolution to your financial crisis, or if you have over $336,900 in debt and cannot qualify for a Chapter 13 bankruptcy, then bankruptcy under Chapter 7 may be your best option. Due to the liquidation aspect of a Chapter 7 bankruptcy, you may not wish to pursue this option if you are a sole proprietor. Partnerships and corporations do not qualify for bankruptcy under Chapter 7.
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