What happens in Chapter 7 bankruptcy?

Chapter 7 bankruptcies are designed to give individuals a fresh start to their financial lives. By providing a person the opportunity to rebuild for the future, they have the satisfaction of knowing they can start anew. Chapter 7 is typically used to eliminate unsecured debts that cannot be repaid and is also useful in stopping lawsuits, garnishments, collections, and creditor harassment. Chapter 7 is a wise, responsible way for a person to regain control over their finances. Please click on the specific questions below that you may have or scroll through the entire page. When you are ready, feel free to contact the law offices of York and Associates to set up a consultation regarding your specific situation and know that we will devote the time and attention necessary to represent you effectively.

How do I Qualify?

If you have no money left to pay your unsecured debt after paying your normal monthly living expenses including your house and/or rent and car payment(s), you most likely will qualify for a Chapter 7 bankruptcy filing. Please do not think you do not qualify after the reform act passed in 2005 as most everyone still does.

Chapter 7 involves several complicated legal tests that should be analyzed by an experienced attorney. Mr. York is very knowledgeable in this field and can personally give you a quick, accurate response on your ability to qualify for Chapter 7.

Do I Have a Hearing?

You will have a hearing at the Chapter 7 Trustee’s office with your attorney present about 30-45 days after your case is filed (the “341 Meeting of Creditors” although creditors very rarely attend the hearing). The Judge will not be present at your hearing. You will be placed under oath and asked a series of questions about what caused your financial difficulty (i.e. loss in income or increase in expenses, etc…), the accuracy of the legal documents filed on your case, and the prospects for significant financial improvement in the near future. Mr. York will prepare you for the questions that will be asked at the hearing. Other hearings besides this one are extremely rare.

Who is the Chapter 7 Trustee?

The Chapter 7 Trustee is the government’s bankruptcy administrator who verifies with your attorney that your bankruptcy case complies with the law.

What Happens to My Property?

The vast, vast majority of cases result in you keeping all of your property (emphasis added). The Trustee will ask you questions at the hearing about the property disclosed on your legal documents to determine if any “non-exempt” property (an “asset case”) exists for the Trustee to take, sell, and pay the proceeds to your unsecured creditors. The vast majority of cases in Texas only involve “exempt” property (a “no-asset case”) which means the Trustee has no legal right to take any of your property.

Once the hearing is held, the Trustee will quickly designate your case as an “asset case” or a “no-asset case” with the great majority again being classified as “no-asset cases” meaning that you keep all of your property.

Your house and car will also be protected as long as these assets are exempted and you stay current on the payments to the mortgage and car finance companies. Again, in Texas, the great majority of houses and cars are exempt which means that you keep both. Mr. York is very knowledgeable on exemption law and will advise you accurately on how your property is protected. Please click here to contact Mr. York.

What Happens to My Debt?

The Chapter 7 will discharge your unsecured debts so that you will have no more personal liability on these debts once the court issues the discharge.

Your liability on secured debts is likewise discharged. However, you do have the option to reaffirm the debt which means that you will be personally liable for the future payments on your house, car, etc... if you sign a reaffirmation agreement This option should only be exercised if you believe that you will be able to afford the payment on your house, car, or other property pledged as collateral under the secured loan.

Finally, under Chapter 7, you may be able to entirely avoid liens off of your property and discharge the underlying debt. For example, if you own household goods that are exempt under bankruptcy law and pledge the goods as collateral to a creditor in exchange for money, the lien you granted to the creditor can be avoided under bankruptcy law meaning that you keep the property while the debt owed to the creditor is discharged.

How Long Until I Get My Discharge?

The Judge will sign your discharge papers in approximately 60-90 days after your hearing with the Trustee and your case will be closed with a discharge granted. The whole process takes about three to four months to complete after filing the case.

The court will mail you a copy of your discharge papers so please keep this important document for your records to serve as documentation that you are not liable on your debts.

What About My Credit?

Your credit can be improved after your bankruptcy. Simple things such as staying current on your house and/or rent payment, your car payment, or having a credit card that you pay in full each month reflects very well on your credit. It is common that most who file for Chapter 7 still receive credit solicitations even after they filed and still qualify for loans. Your credit score should improve through the filing of the case because all balances, records of late payments, etc… are removed from your credit report and the account is listed as “included in Chapter 7 bankruptcy.” See Bankruptcy and Your Credit for more advice.

What if a Creditor Keeps on Reporting a Discharged Debt?

Please make sure to call the credit reporting agency and the creditor itself to let them both know this is inaccurate. The mistake can generally be corrected by you merely giving both the credit reporting agency and the creditor your bankruptcy case number.

If the account is still reported as being a debt that you owe, you could have a legal claim against both entities for damages.

Contact Us With Any Questions

You very well might have more questions on Chapter 7. Mr. York is ready to answer every question you might have. Contact us at any time. We offer flexible payment plans specifically tailored to meet your needs.

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