Chapter 7 Bankruptcy

All debts of any type or amount, including out-of-state debts, are dischargeable in a Chapter 7 case except for the types of debts that are by law nondischargeable in a Chapter 7 case.  The following is a list of the most common types of debts that are not dischargeable in a Chapter 7 case:   (1) Most tax debts and debts that were incurred to pay nondischargeable federal tax debts.   (2) Debts for obtaining money, property, services, or credit by means of false pretenses, fraud, or a false financial statement, if the creditor files a complaint in the bankruptcy case.   (3) Debts not listed on the debtor’s Chapter 7 forms, unless the creditor knew of the bankruptcy case in time to file a claim.   (4) Debts for fraud, embezzlement, or larceny, if the creditor files a complaint in the bankruptcy case.   (5) Debts for domestic support obligations, which include debts for alimony, maintenance, or support, and certain other divorce-related debts, including property settlement debts.   (6) Debts for intentional or malicious injury to the person or property of another, if the creditor files a com-plaint in the bankruptcy case.   (7) Debts for certain fines or penalties.   (8) Debts for most educational benefits and student loans, unless a court finds that not discharging the debt would impose an undue hardship on the debtor and his or her dependents.   (9) Debts for personal injury or death caused by the debtor’s operation of a motor vehicle, vessel or aircraft while intoxicated.   (10) Debts that were or could have been listed in a previous bankruptcy case of the debtor in which the debtor did not    receive a discharge.

Any person who is qualified to file and maintain a Chapter 7 case is eligible for a Chapter 7 discharge except the following (see 11 U.S.C. § 727):   (1) A person who has been granted a discharge in a Chapter 7 case that was filed within the last 8 years.   (2) A person who has been granted a discharge in a Chapter 13 case that was filed within the last 6 years, unless 70 percent or more of the debtor’s unsecured claims were paid off in the chap-ter 13 case.   (3) A person who files and obtains court approval of a written waiver of discharge in the Chapter 7 case.   (4) A person who conceals, transfers, or destroys his or her property with the intent to defraud his or her creditors or the trustee in the Chapter 7 case.   (5) A person who conceals, destroys, or falsifies records of his or her financial condition or business transactions.   (6) A person who makes false statements or claims in the Chapter 7 case, or who withholds recorded information from the trustee.   (7) A person who fails to satisfactorily explain any loss or deficiency of his or her assets.   (8) A person who refuses to answer questions or obey orders of the bankruptcy court, either in his or her bankruptcy case or in the bankruptcy case of a relative, business associate, or corporation with which he or she is associated.   (9) A person who, after filing the case, fails to complete an instructional course on personal financial management.   (10) A person who has been convicted of bankruptcy fraud or who owes a debt arising from a securities law [...]

When a Chapter 7 case is filed by an ineligible person, under bankruptcy terminology that person is said to have abused the Chapter 7 laws.  When a person whose current monthly disposable income is such that he or she can afford to make monthly payments to unsecured creditors in the required amount, a presumption of abuse is said to arise in the case.  If a presumption of abuse arises in a case, the case will be dismissed or converted to Chapter 13 unless the person filing the case can prove the existence of special circumstances, such as a serious medical condition.  Overcoming presumptions is a key part of the services rendered by Attorney Richard Bolger. Schedule an appointment to see how you would be affected by the filing of a bankruptcy petition.

The Chapter 7 Statement of Your Current Monthly Income (Official Form 122A-1) and a Chapter 7 Means Test Calculation (Official Form 122A-2) filed by the person will initially show whether the person is able to make monthly payments to unsecured creditors in the amount required for ineligibility.  If so, the clerk of the bankruptcy court will send a notice to all creditors that a presumption of abuse has arisen in the case.  The United States trustee then has until 10 days after the meeting of creditors to file a statement as to whether a presumption of abuse exists in the case.  Then the United States trustee or any creditor can move to dismiss the case.  The bankruptcy judge will ultimately decide whether the case should be dismissed.

Every person who files a Chapter 7 case must file a Chapter 7 Statement of Your Current Monthly Income (Official Form 122A-1) and a Chapter 7 Means Test Calculation (Official Form 122A-2).  These forms, when completed and filed, show the person’s current monthly income and the current monthly expenses that the person is allowed to claim.  The person may also be questioned about his or her income and expenses at the meeting of creditors.  From these sources a person’s current monthly disposable income is calculated.  This figure is then used to determine the amount of the monthly payment that the person can afford to make to his or her unsecured creditors.  If the person’s monthly disposable income is greater than $207.92, the person will almost always be disqualified from maintaining a Chapter 7 case and the case will be dismissed or, with the person’s consent, converted to Chapter 13.

Means testing is a method of determining a person’s eligibility to maintain a Chapter 7 case.  Under means testing a person whose current monthly income from all sources multiplied by 12 exceeds the median annual income, as reported by the U.S. Census Bureau, for the person’s state and family size, must show that he or she has a disposable monthly income of less than $124.58.  If disposable monthly income is greater than $207.92, there is a presumption of abuse in filing a Chapter 7 case.  Overcoming presumptions is a key part of the services rendered by Attorney Richard Bolger. Schedule an appointment to see how you would be affected by the filing of a bankruptcy petition.  If monthly disposable income is between those two numbers, then you must determine whether the debtor could repay at least 25% of unsecured debt over the course of a 60-month period.  If a debtor is deemed to be able to pay, their case will be dismissed or converted to Chapter 13 unless special circumstances exist.

Any person who resides in, does business in, or has property in the United States is permitted to file a Chapter 7 bankruptcy case except a person who has intentionally dismissed a prior bankruptcy case within the last 180 days.  To be permitted to maintain a Chapter 7 bankruptcy case a person must qualify for Chapter 7 relief under a process called means testing.

A Chapter 7 discharge is obtained by filing and maintaining a Chapter 7 bankruptcy case and being eligible for a Chapter 7 discharge.  However, not all debts are discharged by a Chapter 7 discharge.  Certain types of debts are by law not dischargeable under Chapter 7 and debts of this type will not be discharged even if the debtor receives a Chapter 7 discharge.

It is a court order releasing a debtor from all of his or her dischargeable debts and ordering the creditors not to attempt to collect them from the debtor.  A debt that is discharged is a debt that the debtor is released from and does not have to pay.

A Chapter 7 bankruptcy case is a proceeding under federal law in which the debtor seeks relief under Chapter 7 of the Bankruptcy Code.  Chapter 7 is that part (or Chapter) of the Bankruptcy Code that deals with liquidation.  The Bankruptcy Code is a federal law that deals with bankruptcy.  A person who files a Chapter 7 case is called a debtor.  In a Chapter 7 case, the debtor must turn his or her nonexempt property, if any exists, over to a trustee, who then converts the property to cash and pays the debtor’s creditors.  In return, the debtor receives a Chapter 7 discharge, if he or she pays the filing fee, is eligible for the discharge, and obeys the orders and rules of the bankruptcy court.