About Chapter 7 Bankruptcy

For a one-time attorney fee plus court costs we are able to file your Chapter 7. From the date your case is filed your Chapter 7 will be completed in approximately four months. In a Chapter 7 your case does not get filed until you pay your attorney fees and court costs in full, prior to filing. You will need to complete two credit counseling courses online or over the phone, one before you file and one after you file. And you will need to attend one court date called a 341 Meeting; and, although this meeting is also known as the “first meeting of creditors” rarely if ever do creditors show up. In most instances those in attendance at the 341 Meeting are the debtor(s), their attorney, and the Trustee. The Trustee is in charge of reviewing the petition to determine if there is anything that can be sold to pay your creditors, or any money you may be entitled to by way of lawsuit that could be used to pay your creditors. The Trustee also looks to see if you fraudulently transferred anything out of your name prior to filing. It is our job as your attorney to inform you ahead of filing whether or not there is a chance that any of your property could be administered to pay your creditors. In the great majority of cases the debtor(s) will walk away from their Chapter 7 Bankruptcy with all of their real and personal property and not lose a single thing other than the headache of collection calls.

Upon the filing of your case all collection efforts must cease. This is called the “automatic stay.” Collection activities which must cease upon the filing of the case include lawsuits, sheriff sales, wage garnishments, telephone harassment, collection letters, and utility disconnections.

Typical debts which are 100% discharged in a Chapter 7 include credit cards, medical bills, utilities, unsecured judgments, repossessions, personal loans, and payday loans. Typical debts which are non-dischargeable in a Chapter 7 include any type of child support, student loans, parking tickets, government fines, overpayment of benefits from unemployment or social security and most State and Federal tax debt. Debtors must continue making payments on secured debts they want to keep, for instance, mortgage payments and vehicle payments.

Before your case can be filed you will need to: (1) complete a credit counseling course either online or over the phone; (2) provide your last six months proof of income (paycheck stubs, payroll summary, etc.); (3) provide your last four years of State and Federal income tax returns; (4) pay your attorney fees in full; (5) pay a filing fee of $299.00, and, (6) provide any other documents necessary to the analysis and preparation of your case. You will also need to complete a second online or telephonic counseling course after your case is filed.

There are three basic ways to be disqualified from filing a Chapter 7: (1) to have filed another Chapter 7 in the past eight years; (2) to have more equity in any property than your attorney is able to protect with the available exemptions (so that the Trustee would sell the property to pay your creditors); and, (3) to make to much money (the “means” test).

Every debtor is either Chapter 7 or Chapter 13 bankruptcy is allowed a certain set of exemptions in the their real and personal property. For instance, the Illinois Homestead Exemption is $15,000 for an individual and $30,000 for a married couple who jointly own the home they live in. Or the vehicle exemption which protects up to $2,400 (or $4,800 in a joint case) in any one vehicle to which debtor(s) is/are on title. Certain types of property are 100% exempt. For instance, qualified retirement accounts (pension, 401k, 403(b), etc) are 100% exempt from creditors. Worker’s compensation lawsuit settlements are also 100% exempt even upon receipt of the funds if kept in a separate bank account. If there is something at risk in your Chapter 7 it is your attorney’s job to advise you of that risk up front. You must honestly and truthfulll answer the questions on the bankruptcy petition. Trying to hide property from your attorney and creditors is never a good idea.

The “means” test is a byproduct of the new Bankruptcy laws which took effect in October 2005. The “means” test compares your income to what the IRS says is the average income (“median”) for your household size in the particular County in which you reside. In order to make that comparison the test adds up your last six months’ worth of gross income to get a yearly average and compares that yearly average to the median. If your under the median you pass this test. If you’re over, then your ability to file a Chapter 7 requires further analysis and only an experience attorney should compute the results. It is still possible for you to file a Chapter 7 Bankruptcy even if you make more than the median income for your household size. In fact, only a small percentage of potential debtors are actually disqualified from filing a Chapter 7 by the “means” test.