A chapter 7 case starts with the consumer filing a request with the bankruptcy court in the area where the individual lives or where the business borrower happens to be or has its principal place of business or principal resources.
In addition to the petition, the debtor should likewise file having the court: schedules of investments and liabilities; an listing of present income and expenditures; a statement of economic affairs; as well as a routine of executory obligations and unexpired leases.
Debtors must also deliver the assigned case trustee a copy of the tax return or records for the most new tax many years alongside tax returns filed during the circumstances (providing tax returns for previous several years that should have been filed when the situation started).
Individual debtors have extra record filing requirements.
They must file:
- a certificate of credit counseling as well as a copy of any sort of financial debt repayment plan created using credit counseling;
- information of repayment from companies within 60 days before filing;
- a statement of monthly net income as well as every predicted increase in earnings or expenses after filing;
- as well as a record of every stake the borrower has in federal or state trained education and learning or tuition accounts.
A husband and wife may file a joint request or personal requests.
Even if filing jointly, a husband and wife are subject to all the record filing requirements of personal debtors.
The courts must charge a $245 case filing fee, a $46 miscellaneous administrative fee, and a $15 trustee surcharge. Normally, the costs need to be paid to the clerk of the court upon filing. Having the court’s authorization, nonetheless, particular debtors might pay in installations.
The number of installations happens to be restrained to 4, as well as the consumer should make the last installment no later than 120 days after filing the petition.
The court might expand the timing of any installment, provided that the installment happens to be paid not later than 180 days after filing the petition. The consumer might additionally pay the $46 administrative charge as well as the $15 trustee surcharge in installments.
If a joint application is filed, only one filing cost, one administrative expense, and one trustee surcharge are charged. Borrowers ought to understand that failure to pay these costs could generate dismissal of the case.
If the borrower’s income happens to be less than 150% of the poverty level (as specified in the Bankruptcy Code), and the borrower is not able to pay the chapter 7 expenses even in installments, the court may waive the charges.
In order to finalize the facts that compose the petition, statement of monetary affairs, as well as schedules, the debtor must deliver the following:
- A list of all collectors and the quantity as well as quality of their claims;
- The resource, amount, as well as regularity of the consumer’s income;
- A listing of all of the debtor’s premises; and
- A detailed list of the consumer’s regular monthly residing financial strains, i.e., food items, garments, refuge, tools, taxes, transport, medicine, etc.
Married consumers need to gather this info for their spouse despite whether they happen to be filing a joint request, various personal petitions, or even if only one spouse is filing. In a situation where only one partner files, the earnings and costs of the non-filing spouse are needed so that the court, the trustee and collectors have the ability to assess the family’s budgetary role.
With the schedules that an individual consumer will file happens to be a listing of “exempt” property owned. The Bankruptcy Code permits a specific debtor to safeguard some property from the claims of lenders considering it is exempt under federal bankruptcy regulation or under the laws of the consumer’s residence state.
Several states have actually developed a plan in the Bankruptcy Code that lets each state create its own regulation in place of the federal exemptions.
In some states, the individual borrower has the option of selecting between a federal exemptions or the exemptions obtainable under state statute. So whether certain premises happen to be exempt is frequently an inquiry of state statute. The consumer must consult with a lawyer to establish the exemptions offered in the state where the borrower lives.
Filing a request under chapter 7 “automatically stays” (quits) many collection activities from the borrower or the consumer’s premises.
However filing the petition does certainly not stay particular types of actions detailed under 11 U.S.C. § 362 (b), as well as the stay may works merely for a short time in some situations. The stay needs no administrative activity. As long as the stay is in effect, financial institutions usually may not engage in collections, sue, enter wage garnishments, or also telephone calls demanding repayments. The bankruptcy clerk gives notice of the bankruptcy circumstances to all lenders whose names and addresses have been supplied by the consumer.
Between 21 as well as 40 days after the application is filed, the trustee is going to hold a meeting of creditors. If the U.S. trustee or bankruptcy administrator schedules the meeting at a spot that does not have routine UNITED STATE trustee or bankruptcy administrator present, the meeting might happen to be held no more than 60 days after the order for relief.
In the course of this meeting, the trustee places the borrower under oath, both the trustee and creditors could ask questions. The debtor needs to attend the meeting as well as answer questions relating to the borrower’s budgetary affairs as well as property owned.
If a couple have filed a joint application, they both have to be at the financial institutions’ meeting and respond to inquiries. Within 10 days of the lenders’ meeting, the U.S. trustee will report to the court whether the situation really should be presumed to be an abuse under the means test explained in 11 U.S.C. § 704 (b).
It is important for the consumer to cooperate with the trustee and to provide every record or document that the trustee demands. The Bankruptcy Code needs the trustee to ask the borrower questions at the meeting of creditors to guarantee that the debtor is aware of the potential effects of looking for a discharge in bankruptcy such as the consequence on credit, the capacity to file an application under a different chapter, the outcome of getting a discharge, and the consequence of reaffirming a personal debt.
Some trustees have created documents on these topics at or prior to the meeting to make certain that the debtor is aware of this information. In order to safeguard their separate judgment, bankruptcy judges are prohibited from going to the meeting of creditors.
In order to accord the borrower thorough relief, the Bankruptcy Code permits the borrower to transform a chapter 7 case to a case under chapter 11, 12, or 13 as long as the borrower is qualified to be a borrower under the brand-new chapter.