Will you lose all of your property if you file a Chapter 7 case?

This is a matter of vital concern to many of my clients facing bankruptcy. They desperately want to know which possessions or property they will be entitled to keep and which will be open to seizure by creditors.

Well, let me reassure you on some points with this posting. There are basically three types of property in the eyes of bankruptcy court: Encumbered, unencumbered and exempt. I will explain how you tell the difference - and which type of property may be seized - in this post.

Will you lose all of your property if you file a Chapter 7 case?

Usually not. Certain property is exempt and may not be taken by creditors unless it is encumbered by a valid mortgage or lien. Encumbered property is property against which a creditor has a valid lien, mortgage or other security interest.

A person is usually allowed to retain his or her unencumbered exempt property in a Chapter 7 case. A person may also be allowed to retain certain encumbered exempt property (see below). 

What is exempt property?

Exempt property is property that is protected by law from the claims of creditors. However, if exempt property has been pledged to secure a debt or is otherwise encumbered by a valid lien or mortgage, the lien or mortgage holder may claim the exempt property by foreclosing upon or otherwise enforcing the creditor’s lien or mortgage.

In bankruptcy cases property may be exempt under either state or federal law. Exempt property typically includes all or a portion of a person’s unpaid wages, home equity, household furniture, and personal effects. As your attorney, I can inform you as to the property that is exempt in your case.

What encumbered property may a person retain in a Chapter 7 case?

You may retain (or redeem) certain encumbered personal and household property, such as household furniture, appliances and goods, wearing apparel, and tools of trade, without payment to the secured creditor, IF the property is exempt and if the mortgage or lien against the property was not incurred to finance the purchase of the property.

You may also retain without payment to the secured creditor any encumbered property that is both exempt and subject only to a judgment lien that is not divorce-related.

Finally, you may retain certain encumbered exempt personal, family, or household property by paying to the secured creditor an amount equal to the replacement value of the property, regardless of how much is owed to the creditor.

Thanks for reading and let me know if you have any questions,

Matt
___________________________________

Matt Hughson
New York Bankruptcy Lawyer

Ziff Law Firm, LLP
303 William St., Elmira, NY 14901
Tel: (607) 733-8866
Fax: (607) 732-6062
Toll Free: 1-800-943-3529
Email: mhughson@zifflaw.com
Web: www.zifflaw.com

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If an aggressive creditor has threatened to attach or “garnish” your assets or income, your Chapter 7 case should be filed immediately.

Why? To take advantage of the protection from creditors that accompanies the filing of a Chapter 7 case. This advice also applies if a foreclosure action has been filed against your home - it may be necessary to file your case immediately in order to protect your interest in the property.

Cause your creditors to ‘STAY’ back

The filing of a Chapter 7 case automatically suspends virtually all collection and other legal proceedings pending against you. A few days after a Chapter 7 case is filed, the court will mail a notice to all creditors ordering them to refrain from any further action against you. This court-ordered suspension of creditor activity against the person filing is called an automatic stay.

If necessary, notice of the automatic stay may be served on a creditor earlier by the person or the person’s attorney. Any creditor who intentionally violates the automatic stay may be held in contempt of court and may be liable in damages to the person filing.

Is there anything that the automatic stay does NOT cover?

Criminal proceedings and actions to collect domestic support obligations from exempt property or property acquired by the person after the Chapter 7 case was filed are NOT affected by the automatic stay.

The automatic stay also does not protect cosigners and guarantors of the person filing, and a creditor may continue to collect debts from those persons after the case is filed.

As an experienced New York and Pennsylvania bankruptcy attorney, I know how complicated is it to navigate a bankruptcy. My goal is to have my clients go through the process with as little stress as possible - and the best chance for future financial success.

I have much more information to share about Chapter 7 bankruptcy - check out some of my other posts on the subject and visit the NY Bankruptcy Blog again soon as I will continue to post on this topic.

Thanks for reading and let me know if you have any questions,

Matt
___________________________________

Matt Hughson

New York Bankruptcy Lawyer

Ziff Law Firm, LLP
303 William St., Elmira, NY 14901
Tel: (607) 733-8866
Fax: (607) 732-6062
Toll Free: 1-800-943-3529
Email: mhughson@zifflaw.com
Web: http://www.zifflaw.com

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When is the best time to file a Chapter 7 case?

The answer depends on a few factors:

• The status of the debtor’s (I’m going to assume that’s you, the reader, from now on in this post) dischargeable debts.
• The nature and status of your nonexempt assets.
• The actions taken or threatened to be taken by your creditors.

The following rules should be your guide:

1. DO NOT FILE the case until all anticipated debts have been incurred. Why? Only debts that have been incurred when the case is filed are dischargeable. If your timing is off on this aspect of your case, it will be another six years before you are again eligible for a Chapter 7 discharge.

For example, let’s say you incurred substantial medical expenses. You should not file a Chapter 7 case until your illness or injury has been either cured or covered by insurance. It will do little good to discharge, say, $100,000 of medical debts now and then incur another $100,000 in medical debts after the case has been filed.

2. DO NOT FILE the case until you have received all nonexempt assets to which you may be entitled. If you are is entitled to receive an income tax refund or a similar nonexempt asset in the near future, the case should not be filed until after the refund or asset has been received and disposed of. Otherwise, the refund or asset will have to be turned over to the trustee.

3. DO NOT FILE if you expect to acquire nonexempt property through inheritance, life insurance or divorce in the next 180 days, because the property may have to be turned over to the trustee.

4. DO FILE if an aggressive creditor has threatened to attach or garnish your assets or income. Why? The case should be filed immediately to take advantage of the automatic “stay” that accompanies the filing of a Chapter 7 case. I’ll file a post solely on the subject of a stay - a suspension of most collection and legal proceedings against debtors that accompanies the filing of a Chapter 7 case.

If a creditor has threatened to attach or garnish your wages, or if a foreclosure action has been filed against your home, it may be necessary to file a Chapter 7 case IMMEDIATELY in order to protect your interest in the property.

In my next blog post, I am going to explain exactly how a Chapter 7 filing can help to protect your assets under the right circumstances.

Thanks for reading and let me know if you have any questions,

Matt
___________________________________
Matt Hughson
New York Bankruptcy Lawyer
Ziff Law Firm, LLP
303 William St., Elmira, NY 14901
Tel: (607) 733-8866
Fax: (607) 732-6062
Toll Free: 1-800-943-3529
Email: mhughson@zifflaw.com
Web: http://www.zifflaw.com

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If you are facing bankruptcy and are concerned about the fees associated with filing a case, don’t hold off on seeking expert advice.

A common question I hear from my clients: “How much is the Chapter 7 fee and when do I have to pay it?”

As I will explain in this post, there is a filing fee for Chapter 7 cases. You should be aware of how much it is, when it needs to be filed and that there are some special circumstances you might possibly be eligible for.

The filing fee is $299 for either a single or a joint case. The filing fee is payable when the case is filed.

Exceptions

If the person filing the Chapter 7 case can show that his or her income is less than 150% of the official poverty line, and that he or she is unable to pay the filing fee, the court can waive payment.

If the person filing the case is unable to pay the entire filing fee when the case is filed, it may be paid in up to four installments, with the final installment due within 120 days. There is an exception to this rule as well - the period for payment may later be extended to 180 days by the court, if there is a valid reason for doing so.

The bottom line

Unless payment is waived by the court, the entire filing fee must ultimately be paid or the case will be dismissed and no debts will be discharged.

In some upcoming posts, I plan on explaining the timing for filing a Chapter 7 case and how the case may affect your credit rating. Stay tuned!

Thanks for reading and let me know if you have any questions,

Matt
___________________________________
Matt Hughson
New York Bankruptcy Lawyer

Ziff Law Firm, LLP
303 William St., Elmira, NY 14901
Tel: (607) 733-8866
Fax: (607) 732-6062
Toll Free: 1-800-943-3529
Email: mhughson@zifflaw.com
Web: http://www.zifflaw.com

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“Is there anything that I must do before I can file a Chapter 7 case?”

YES!

This is one of the top questions I hear as a New York and Pennsylvania bankruptcy attorney. The answer is an emphatic YES. There is a very important condition that you must meet before you are eligible to file a Chapter 7 case.

It boils down to getting expert help to assess your credit and financial situation.

You will not be permitted to file a Chapter 7 case unless you have, during the 180-day period prior to filing, received from an approved nonprofit budget and credit counseling agency an individual or group briefing that outlined the opportunities for available credit counseling and assisted you in performing a budget analysis.

This briefing may be conducted by telephone or on the Internet, if desired, and must be paid for by you.

When your Chapter 7 case is filed, a certificate from the agency describing the services provided to you must be filed with the court.

A copy of any debt repayment plan prepared for you by the agency must also be filed with the court.

Please note: In emergency situations, the required credit counseling MAY be conducted after the case is filed.

It can be very confusing to balance the stress of overdue bills with the dates, requirements and exceptions for filing a bankruptcy case. Let me know if you have any questions and if I can elaborate on details to match the specifics of your situation.

Thanks for reading,

Matt
___________________________________
Matt Hughson

New York Bankruptcy Lawyer
Ziff Law Firm, LLP
303 William St., Elmira, NY 14901
Tel: (607) 733-8866
Fax: (607) 732-6062
Toll Free: 1-800-943-3529
Email: mhughson@zifflaw.com
Web: http://www.zifflaw.com

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If you are facing bankruptcy, you are probably wondering what type of bankruptcy case you should file.

You may have seen a lot of information concerning Chapter 7 cases. What is Chapter 7? To begin with the fundamentals, Chapter 7 is a section of the federal Bankruptcy Code dealing with liquidation.

In a Chapter 7 bankruptcy case, the debtor (the person filing the case) turns his or her nonexempt property, if there is any, over to a trustee. The trustee liquidates the property - that is, sells it for cash. The trustee takes the proceeds of the sale of the debtor’s nonexempt property and pays the debtor’s creditors. In return, the debtor receives a CHAPTER 7 DISCHARGE (additional conditions apply - such as the debtor’s payment of the filing fee, eligibility for the discharge of debts and adherence to all of the orders and rules of the court).

Who should NOT file a Chapter 7 case?

There are a number of reasons a debtor may not be able to file a Chapter 7 case. Consider the following criteria:

• A person who is not eligible for a Chapter 7 discharge should not file a Chapter 7 case. Look at my post “Debt Discharge: 10 Reasons You Could Be Disqualified In a Chapter 7 Bankruptcy Case” for a specific breakdown of reasons that a person may not be eligible for a Chapter 7 discharge of debts.

• A person who has substantial debts that are not dischargeable under Chapter 7 should not file a Chapter 7 case.

• It is not usually advisable for a person with disposable income sufficient to make the required minimum payments to unsecured creditors to file a Chapter 7 case. In this scenario, a presumption of abuse will arise and the case will probably be dismissed or converted to Chapter 13. I’ve blogged about the presumption of abuse in Chapter 7 cases before; see “Chapter 7 Bankruptcy: Don’t ‘Abuse’ the System.”

In this post, I’ve condensed some of the common reasons Chapter 7 might not be right for a person filing bankruptcy. It is, however, the right choice for many people facing bankruptcy. Until you go over your case with an experienced bankruptcy attorney, it is difficult to pinpoint your best course of action.

Thanks for reading and let me know if you have any questions,
Matt
___________________________________
Matt Hughson

New York Bankruptcy Lawyer

Ziff Law Firm, LLP
303 William St., Elmira, NY 14901
Tel: (607) 733-8866
Fax: (607) 732-6062
Toll Free: 1-800-943-3529
Email: mhughson@zifflaw.com
Web: http://www.zifflaw.com

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Chapter 7 bankruptcy cases “discharge” or release a debtor from many - but not all - types of debt.

A discharged debt, as I have explained in other posts on the NY Bankruptcy Blog (check out “Bankruptcy Basics: What Is a Chapter 7 Bankruptcy And How Does It Work?”), is a debt that the debtor does not have to pay, and creditors can no longer attempt to collect. If you have been struggling with debt collection services, you can imagine what a relief a Chapter 7 discharge can be.

What exactly are ‘dischargeable’ debts?

All debts of any type or amount, including out-of-state debts, are dischargeable in a Chapter 7 case EXCEPT for certain types of debts determined by law to be nondischargeable in a Chapter 7 case.

The following 10 types of debt are the MOST COMMON 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 complaint 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.

It is important to me to clarify the process of filing a Chapter 7 case for my blog readers. As you can see, however, the regulations are lengthy and complicated!

I am more than willing to explain the finer points of Chapter 7 FAQs. Just contact me for more particulars - I am happy to answer your questions.

Thanks for reading,

Matt
___________________________________
Matt Hughson

New York Bankruptcy Lawyer

Ziff Law Firm, LLP
303 William St., Elmira, NY 14901
Tel: (607) 733-8866
Fax: (607) 732-6062
Toll Free: 1-800-943-3529
Email: mhughson@zifflaw.com
Web: http://www.zifflaw.com

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In other postings here on the NY Bankruptcy Blog, I’ve explained some of the conditions necessary to file a bankruptcy case under Chapter 7 of our federal Bankruptcy Code.

Since Chapter 7 ultimately nullifies or “discharges” the claims of creditors, the courts are very selective in allowing debtors to file this type of bankruptcy case. Here, I’ve compiled 10 important criteria the courts use to determine if a person is eligible for Chapter 7 discharge of debts.

Any person who is qualified to file and maintain a Chapter 7 case is eligible for a Chapter 7 discharge EXCEPT the following:

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% or more of the debtor’s unsecured claims were paid off in the Chapter 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 files 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 violation.

If, for any of the above conditions, you are not eligible for a Chapter 7 discharge, you should not file a Chapter 7 case in the first place. As an experienced New York and Pennsylvania bankruptcy attorney, I can explain the other options open to you - before you go on a wild goose chase with a type of filing that will only be dismissed.

Thanks for reading and let me know if you have any questions,
Matt
___________________________________

Matt Hughson

New York Bankruptcy Lawyer

Ziff Law Firm, LLP
303 William St., Elmira, NY 14901
Tel: (607) 733-8866
Fax: (607) 732-6062
Toll Free: 1-800-943-3529
Email: mhughson@zifflaw.com
Web: http://www.zifflaw.com

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In a previous post, I briefly explained how bankruptcy courts use means testing to determine if a person is eligible to maintain a Chapter 7 bankruptcy. Let me briefly recap, before I explain what happens if you apply but don’t qualify:

Means testing looks at how much discretionary income you have available to put toward unsecured debt. The Statement of Current Monthly Income and Means Test Calculation will initially show whether you are able to make monthly payments to unsecured creditors - if you can, in an amount above $100 per month, you are ineligible to file a Chapter 7 bankruptcy.

The clerk of the bankruptcy court will send a notice to all the creditors involved, reporting 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. If the statement is filed, 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.

Why is it called ‘presumption of abuse’?

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.

In this situation, a presumption of abuse means that the person seeking Chapter 7 liquidation actually has a current monthly DISPOSABLE income such that he or she can afford to make monthly payments to unsecured creditors in the required amount. Allowing this debtor the protection from future claims by creditors provided by Chapter 7 could be unfair, so a presumption of abuse is said to arise in the case. (I’ll discuss the details of a Chapter 7 “discharge” of debts in an upcoming post.)

What happens next? 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.

Thanks for reading - and remember, I’m happy to answer your questions.

Matt
___________________________________

Matt Hughson

New York Bankruptcy Lawyer

Ziff Law Firm, LLP
303 William St., Elmira, NY 14901
Tel: (607) 733-8866
Fax: (607) 732-6062
Toll Free: 1-800-943-3529
Email: mhughson@zifflaw.com
Web: http://www.zifflaw.com

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In a previous blog post, “Bankruptcy Basics: What is Chapter 7 Bankruptcy and How Does It Work?” I began to explain the details of filing bankruptcy according to Chapter 7 of the federal Bankruptcy Code. This type of filing, Chapter 7, has compelling advantages to offer debtors, including a resolution to ongoing debt claims if certain criteria are met. “Means testing” is part of the process of establishing eligibility, and I am going to explain what it is.

Do you have the ‘means’ to pay off debt?

Means testing is a method of determining a person’s eligibility to maintain a Chapter 7 case.

A person whose annualized current monthly income from all sources 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 is not able to pay a minimum of $100 per month for 60 months to his or her unsecured creditors from his or her disposable monthly income.

Let me restate that in overly simplistic terms: In order to be eligible to maintain a Chapter 7 case, you must show that you cannot spare $100 a month to pay off debt.

Of course the specifics are very important. As I mentioned, your income level, family circumstances, place of residence are all analyzed and play a part in determining eligibility.

Disposable monthly income is a person’s current monthly income from all sources, minus PERMITTED current monthly expenses.

What happens if you don’t meet the benchmark? The Chapter 7 case of a person whose disposable monthly income is such that he or she is deemed to be able to pay $100 per month or more to unsecured creditors for 60 months will be dismissed or converted to Chapter 13 (unless special circumstances exist, a state of affairs I will explain in other FAQ posts).

How is means testing conducted?

Every person who files a Chapter 7 case must file a document called the Statement of Current Monthly Income and Means Test Calculation.

This document, when completed and filed, is a record of a person’s current monthly income and the current monthly expenses that he or she is allowed to claim. A person may also be questioned about income and expenses at a meeting with creditors.

From these sources, a debtor’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 amount of this monthly payment is above a certain figure (usually $100), the person will almost always be disqualified from maintaining a Chapter 7 case.

What happens if means testing finds that you are ineligible to file for Chapter 7? If you file, but do not meet the criteria, you are said to have “abused” the Chapter 7 laws. In my next blog post, I will explain the term presumption of abuse and what it means for those who file for Chapter 7 but do not meet the conditions.

Thanks for reading and let me know if you have any questions,
Matt
___________________________________

Matt Hughson

New York Bankruptcy Lawyer

Ziff Law Firm, LLP
303 William St., Elmira, NY 14901
Tel: (607) 733-8866
Fax: (607) 732-6062
Toll Free: 1-800-943-3529
Email: mhughson@zifflaw.com
Web: http://www.zifflaw.com

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