This article will primarily deal with the processes involved with the filing of chapter 7 bankruptcy, sometimes called ‘consumer,’ or ‘personal’ bankruptcy and is a continuation from the article of the same name.
Step 7 – Notification of Creditors
About 7 days after the court receives your chapter 7 bankruptcy petition, it will notify all those creditors that you have listed on your filed pleadings that you have filed bankruptcy. The court will announce the case trustee and the date and time for the section 341 first meeting of creditors.
Step 8 – Supplying Copies of Your Federal Tax Returns
At least one week before the 341 meeting, you must supply copies of your most recent federal tax returns to the trustee and certain financial documentation, such as three months bank statements incurred prior to filing.
In chapter 13 cases, you must supply the standing trustee the last four years of your tax returns. If you fail to supply these tax returns, your case may be dismissed.
Therefore, it is important to file your tax returns prior to filing the bankruptcy.
Step 9 – Chapter 7 Bankruptcy 341 Meeting; First meeting of Creditors
Most petitioners dread the 341 meeting because they do not know what to expect. This fear is usually way overblown. Since these meetings are open to the public, we suggest that you attend a meeting for other positioners prior to attending your own. Since 341 meetings are little different between Chapter 7 and Chapter 13, be sure to attend the correct kind of filing meeting. This will give you a complete and accurate picture of what actually goes on at a 341 meeting and enables you to be thoroughly prepared for your own.
In Chapter 7 cases, seldom do any creditors show up at the meeting, although one or two might. They do have the right to ask questions, but this does not frequently happen. The 341 meetings are not emotional affairs. There are conducted to gather, clarify and affirm the statements that you made in your bankruptcy filing documents, with respect to assets and liabilities.
The 341 meeting usually takes place 30 to 40 days after you file. The trustee conducts the meeting, and you and your attorney must attend. Also bring proof of your Social Security number and a photo identification document, like a driver’s license.
Typically, the trustee will ask you if you have any nonexempt property that can be sold to pay off creditors. They may also ask about any payments or transfers you made in the two years preceding the bankruptcy. They will probably also ask about the value of your home, value of your car, any retirement plans, and other questions that meet the requirements of the state you live in.
They may also ask about nonexempt assets that you may want to keep, and if so, arrange for you to pay for them. If you do not want to keep nonexempt property, the trustee arranges to have those assets evaluated and picked up. They will then be sold for the benefit of creditors.
Your attorney will review 341 meeting questions with you before the meeting. An experienced attorney can usually anticipate any areas of uncertainty and will usually deal with those before the 341 meeting. In most chapter 7 cases there will be little or no nonexempt assets. Usually this is the end of 341 meetings. In about 60 to 90 days after the 341 meeting, the bankruptcy debts are discharged, assuming the debtor passed and file their post condition credit counseling certificate.
There are a few milestones and chapter 7 bankruptcy processes that you want to keep in mind:
- The trustee has 10 days after the 341 meeting to decide whether you passed or failed the Means test. If you fail, the trustee will ask the court to dismiss your case.
- The trustee and creditors have 30 days after the 341 meeting to object to any of your claims of exempt property. If you have amended exemption claims, the 30 day clock starts from the time of any amendments.
- Creditors have 60 days to object to the discharge of certain kinds of debt. If they don’t file objections, it’s too late for them to do it later, and you are over the last bankruptcy hurdle.
All these deadlines assume you have supplied accurate information and have answered questions accurately.
Section 341 first meeting of creditors are important for the debtor filing the petition, in that they will have the opportunity to answer questions the bankruptcy trustee for their case might have with respect to the extent location and availability of assets to pay creditors’ claims, as well as information regarding the liabilities of the petitioner. For creditors, some opportunity to ask questions of the petitioner with respect to his available assets and liabilities in the case as well as asking questions about inconsistencies found in the schedules of assets and liabilities, and statement of financial affairs filed by the debtor.
Additionally, this section 341 first meeting of creditors date triggers the time for filing complaints objecting to discharge then go 90 days after the time first set the 341 meeting, as well as time for the debt of the bankruptcy trustee to object to the debtor’s claim of exemptions – 35 days from the date last set for the section 341 meeting. Extended 341 first meeting of creditors are not encouraged by the bankruptcy trustee and the debtor’s attorneys, especially if the question becomes too intense at the 341 meetings specific to a creditor’s particular issue concerning the debtor.
After 15 to 60 minutes of questioning the chapter 7 bankruptcy trustee will more than likely suggest and/or recommend to the creditor or the creditor’s attorney asking the questions to notice a rule 2004 examination in order to ask the debtor questions in a formal atmosphere with no time constraints. Normally there are time constraints at a section 341 first meeting creditors because there are other scheduled debtors to give testimony and to answer questions to the bankruptcy trustee, normally anywhere from 3 to 8 cases every half hour.
Assets in Chapter 7 cases
In a few Chapter 7 cases that have assets that need to be liquidated or distributed for creditors, the case will remain open until all those assets are dealt with. Sometimes, depending on the kind of assets, their disposal can take quite a long time, sometimes years. Once your case is filed the non-exempt assets are turned over to the trustee and those assets become property of the bankruptcy estate, and no longer yours to do what you want.
You must, of course, cooperate with the trustees to dispose of those non-exempt properties and assist with collecting any monies or properties that might be owed to you. You may have tax refunds that are outstanding at the close of bankruptcy, or outstanding real estate or personal notes that needs to be collected or sold to pay your creditors.
Those are the steps that you must go through to finalize your Chapter 7 bankruptcy case. Barring any foreseen complications, you should be done with your bankruptcy case in about 120 to 180 days after the 341 meeting.
I know there is a lot of information here so my advice is to call our office at (775) 786-7600 or (775) 690-2190 anytime to set up a complimentary and confidential consultation with me at your earliest convenience. You can also visit our new business Facebook Page for more information.
1. The “automatic stay” provisions of section 362(a) of the Bankruptcy Code are probably the most important tool available to the Debtor when filing a bankruptcy petition, whether it’s a chapter 7 petition, chapter 11 petition or a chapter 13 petition. Essentially, filing a petition, even an involuntary petition under section 303 of the Bankruptcy Code, operates as an automatic stay, applicable to all entities, mostly creditor entities,
(a) Except as provided in subsection(b) of section 362, a petition filed under section 301, 302, or 303 of this title, or an application filed under section 5(a)(3) of the Securities Investor Protection Act of 1970, operates as an automatic stay, applicable to all entities.
(1) the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title;
(2) the enforcement, against the debtor or against property of the estate, of a judgment obtained before the commencement of the case under this title;
(3) any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate;
(4) any act to create, perfect, or enforce any lien against property of the estate;
(5) any act to create, perfect, or enforce against property of the debtor any lien to the extent that such lien secures a claim that arose before the commencement of the case under this title;
(6) any act to collect, assess, or recover a claim against the debtor that arose before the commencement of the case under this title;
(7) the setoff of any debt owing to the debtor that arose before the commencement of the case under this title against any claim against the debtor; and
(8) the commencement or continuation of a proceeding before the United States Tax Court concerning a tax liability of a debtor that is a corporation for a taxable period the bankruptcy court may determine or concerning the tax liability of a debtor who is an individual for a taxable period ending before the date of the order for relief under this title. Under section 362(b), the filing of the Petition does not operate as a stay of the commencement or continuation of a criminal action or proceeding against the debtor, and the following:
(b) The filing of a petition under section 301, 302, or 303 of this title, or of an application under section 5(a)(3) of the Securities Investor Protection Act of 1970, does not operate as an automatic stay –
(1) under subsection (a) of this section, of the commencement or continuation of a criminal action or proceeding against the debtor;
(2) under subsection (a) –
(A) of the commencement or continuation of a civil action or proceeding-
(i) for the establishment of paternity;
(ii) for the establishment or modification of an order for domestic support obligations;
(iii) concerning child custody or visitation;
(iv) for the dissolution of marriage, except to the extent that such proceeding seeks to determine the division of property that is property of the estate; or
(B) of the collection of a domestic support obligation from property that is not property of the estate;
(C) with respect to withholding of income that is property of the estate of property of the debtor for payment of a domestic support obligation under a judicial or administrative order or a statute;
(D) of the withholding, suspension, or restriction of a driver’s license, a professional or occupational license, or a recreational license under State law, as specified in section 466(a)(16) of the Social Security Act;
(E) of the reporting of overdue support owed by a parent to any consumer reporting agency as specified in section 466(a)(7) of the Social Security Act;
(F) of the interception of a tax refund, as specified in section 464 and 466(a)(3) of the Social Security Act or under an analogous State law; or
(G) of the enforcement of a medical obligation as specified under title IV of the Social Security Act;
What’s important about the automatic stay is that it automatically goes into place upon the filing of a voluntary petition for bankruptcy relief whether its chapter 7, chapter 11 or chapter 13. Although it’s generally wise to give some kind of fax or email notice to a creditor that is about to take action against the debtor, such as a repossession, a trustee’s foreclosure sale or wage garnishment.
It is better practice to spend 2 to 3 minutes sending, emailing or faxing out a Notice to a creditor about to take an aggressive action against the debtor, as oppose to taking some action against the creditor for violating the stay by taking action after a voluntary petition for bankruptcy was filed, even though they may have not known about the filing itself.
The automatic stay continues until such property is no longer property of the estate, or the Automatic Stay of section 362 continues until the earliest of – (A) at the time the case is closed; (B) at the time the case is dismissed; (C) if the case is a case under chapter 7 of this title concerning an individual or a case under chapter 9, chapter 11, chapter 12, or chapter 13 of this title, the time of discharge is granted or denied.
That explains why in a chapter 7 case that normally last 4 to 8 months from the time of petition filing to the time the discharge is entered, why a secured creditor takes no action to obtain relief from the stay. It can recommence its Trustee’s foreclosure sale or any other action to take possession of real property after the discharge has been granted or denied.
The way for a creditor to gain relief from the automatic stay, or to lift the bankruptcy umbrella from actions that the creditor may intend or was acting upon the petition filing, is found in section 362(d), which states that the Court may grant relief from the stay provided under subsection (a) of this section, such as by terminating, annulling, modifying, or conditioning such stay –
(1) for cause, including the lack of adequate protection of an interest in property of such party in interest.
(2) with respect to an automatic stay of an act against property under subsection (a) of this section, if –
(A) the debtor does not have an equity in such property; and
(B) such property is not necessary to an effective reorganization.
In the case of single asset real estate cases, there are certain matters that determine when a creditor may gain relief from the stay, such as the debtor filing within the 90 day period a Plan of Reorganization that has a reasonable possibilities of being confirmed within a reasonable time; or the debtor commenced monthly payments that are in an amount equal to interest at the then applicable full contract rate of interest on the value of the creditor’s interest in the real estate. An individual filing a petition can always resort to providing adequate protection to the creditor in order to stop the court from terminating, modifying, annulling or conditioning the automatic stay provisions of section 362(a).
Ways of getting adequate protection are found in section 361 of the bankruptcy code. The most common method of providing adequate protection to creditors is to make a cash payment or periodic cash payments to such creditor entity, or provide such entity an additional or replacement lien to the extent such stay, use, sale, lease or grant results in a decrease in value such entity’s interest in such property; or granting such other relief, that will result in the realization by such entity of the indubitable equivalent of such entity’s interest in such property.
This may seem like a lot of information but it is designed to protect you. Give us a call at (775) 786-7600 or (775) 690-9120 for a free and confidential consultation to discuss your financial situation, alternatives to bankruptcy and the many details of filing for bankruptcy whether it be chapter 7, chapter 11 or chapter 13.
Senior-citizen bankruptcies are on the rise, driven by socioeconomic factors such as insufficient Social Security payments, higher health-care costs, and increased individual responsibility for retirement savings.
Between 2013 and 2016, 1 in 8 filers in the U.S. was age 65 or older; during the same time period, 21% were age 55 to 64, according to Robert Lawless, law professor at the University of Illinois’ College of Law who has co-authored research on the subject. There’s been an overall trend toward older filers since the study was first conducted in 1991, he says.
While some of the stigma of declaring bankruptcy has dissipated, there can still be negative consequences such as losing property and long-lasting effects on credit. Before filing, make sure you weigh your options and avoid these potentially costly mistakes:
- Not sufficiently exploring self-help options
- Haphazardly liquidating assets
- Taking on additional financial obligations to pay the bills
- Not seeking legal help
If you’re feeling in over your head, it’s advisable to consult an attorney. The Eldercare Locator connects older Americans and their caregivers with trustworthy local support resources, including legal help, based on their location. Seniors can also use the Legal Services Corp. website to locate nonprofit legal aid organizations in their state that may be able to help them navigate debt and bankruptcy-related issues.
The website of the National Association of Consumer Bankruptcy Attorneys is another resource seniors can use to locate an attorney in their area. For seniors who don’t qualify for legal aid, but are concerned about fees, there are a number of firms that will do pro-bono work and sometimes firms will offer reasonable and discounted payment plans.
Why Many Older Americans Are Going Into Debt?
Experts have observed a rapid surge of retirees getting into insurmountable debt. The skyrocketing figures are due to the following reasons:
- Credit card debt
- Medical expenses
- Job loss
- Reduced income
- Expensive insurance co-pays
Many seniors also experience a lack of support, lack of access to necessities, and isolation. Filing in Nevada for bankruptcy offers a way to ease the burden of debt and get peace of mind in their golden years.
What Kind of Bankruptcy Can Seniors Qualify For?
Most older adults filing for bankruptcy will qualify for either Chapter 7 or Chapter 13 bankruptcy:
Chapter 7 Bankruptcy
This type of filing will allow seniors to discharge most or all their debts. Chapter 7 is usually granted to filers who make less than their state’s median income.
The court may also order a means test to determine if an elderly filer can pay a Chapter 13 plan. Under Chapter 7, the court trustee may ask the debtor to turn over any non-exempt assets. These assets will be sold to help pay the petitioner’s creditors.
Chapter 13 Bankruptcy
This type of filing involves a three-to-five-year repayment plan. Successful filers generally get to keep their property and assets.
Older adults who still have steady income may prefer this repayment plan, especially for those who do not pass the means test or make more than the state’s median income. The success of filing may depend on selecting the right type of bankruptcy to file for. Therefore, it is best for petitioners to seek the help of a bankruptcy lawyer in Raleigh for expert assistance on the next steps.
Seniors May Be Able to Keep Their Homes After Filing for Bankruptcy.
There is something called a homestead exemption when it comes to bankruptcy laws. It is a certain amount of home equity that’s protected under bankruptcy. However, some seniors may risk losing their homes, especially if they have large amounts of equity or unpaid mortgage.
It is critical to learn how much equity the debtor’s state protects under bankruptcy. Some cover the full value of the petitioner’s home under Chapter 7 in Nevada. On the other hand, older adults may keep their home under Chapter 13, provided they are able to continue paying the mortgage. The repayment plan can also help debtors pay mortgage arrears.
Learn More About Bankruptcy for the Elderly in Reno.
Bankruptcy can pave the way for a more secure retirement for debt-ridden older adults. It is natural to have many questions about the decision to file, especially when it involves factors like your social security income and retirement accounts. Call the Harris Law office today at 775-786-7600 for a free consultation, also visit our new Facebook Page for more information.
This post will primarily deal with Chapter 7 bankruptcy and 13 bankruptcies. Chapter 11 business reorganization bankruptcies are a different animal all to themselves. You will follow the steps below when you file for a personal or as it’s sometimes termed ‘consumer’ bankruptcy for debt relief.
STEP 1 – Assessing Your Case
In order for the attorney to be able to properly assess your case, an initial interview will gather the following information:
- Copies of three years of your most recent tax returns.
- The amount of income tax that you may owe.
- The amount of domestic support obligations in any arrears.
- What is your home worth and the balance owed on recorded mortgages and the amount of monthly installments that you are behind.
- How much are your cars worth and the amount that you owe on them.
- An approximate of balances that you owe on all your bills including credit cards.
- A copy of pay stubs for the last 60 days.
- Your home mortgage documents.
- The certificate of title on any motor vehicles you on.
- In court papers for lawsuits you are involved in.
- Divorce, domestic support orders or marital settlement agreements.
- Documents showing the amount of income from any sources.
STEP 2 – Finding Creditors
Begin finding your creditors. In most cases you know who you owe money to. Remember, you only receive a discharge for those creditors you list in your bankruptcy schedules, notwithstanding the correctness of the amounts owed. You have outstanding invoices and bills which detail the amount of money owed, the account numbers and their contact addresses. In a few instances, you may be unsure of any outstanding balances. You want to be sure that there are not any old or forgotten debts. Again, creditors you do not include on your bankruptcy documents will not be discharged.
Order credit reports from all three of the major credit reporting agencies. Some creditors may have not reported to all the agencies, and some are missed by others.
STEP 3 – Choosing an Experienced Attorney
Interview and decide on an experienced attorney. Now that you have all your information gathered, you can interview attorneys well-armed about your specific circumstances, and you will receive informed answers to your questions.
After deciding on an attorney, ask them for a worksheet of all information they are going to need. This will require you to gather as much information as possible. The answer to all these questions is going to wind up in the bankruptcy filing, so it is important to have accurate and timely information.
STEP 4 – Credit Counseling
Arrange for credit counseling. Ask your attorney for local recommendations. BARF or BAP requires you have a certificate from an approved credit counseling agency within 180 days of your petition filing for chapter 7 bankruptcy.
STEP 5 – The Questionnaire
Many law firms will give you a questionnaire to complete at home, click on the link for an example. Fortunately, you have already taken a big step toward completing this paperwork by gathering the data in Step One. It’s important to complete the questionnaire accurately. Remember this information is going to the bankruptcy court and it will be reviewed and even sometimes audited. Take your time.
Return your paperwork to your attorney and they will make up the official documents and pleadings from the questionnaires you have completed. When they give you the draft, take it home and review it thoroughly and make any corrections before you return it to the attorney.
STEP 6 – Filing the Petition
Once all the documents are complete, you and your attorney assess your situation and will decide on the actual date to file the petition and pleadings with the court. There are several considerations that may come into play as to the filing, or petition date. For example, you may have recently lost your job. You may want to delay the filing so your average income for the last six months would be lower, thereby making it easier to pass the Means test. Your attorney will guide you to this decision.
Once you do file, the section §362(a) automatic stay kicks in. The stay simply means that creditors are forbidden to take any action against you. Collection calls and actions will stop immediately. It usually takes about 7 to 10 days for the courts to notify your creditors. If you receive collection calls, simply tell them you have filed for bankruptcy and they will receive their notice in the mail in a few days.
TO BE CONTINUED: Next Blog Post – Information about the automatic stay provision.
Your Bankruptcy Attorney
It is imperative that you have an attorney to deal with the current bankruptcy laws. In almost all cases, an experienced attorney will save you at least the amount of their fees by avoiding pitfalls that you will inevitably make trying to do it yourself. Your attorney will become your direct interface with the other players in the bankruptcy process and will keep the interaction that you have with the other players to a minimum.
Insist on an experienced bankruptcy attorney, not a credit counselor, debt counselor or paralegal.
After you have settled on an attorney to handle your filing, it is important that you be candid, honest and straightforward with him. This is the only way in which your attorney can provide the best outcome for your individual circumstances. Remember, your bankruptcy attorney is not going to assist you in hiding assets or fail to disclose assets.
Once your attorney has all the facts of your specific situation, he or she will spend a great deal of time discussing whether Chapter 7, Chapter 13 or Chapter 11 is the best way for you to proceed. He or she will discuss the advantages and disadvantages of each kind of bankruptcy. Therefore it is so important for you to disclose all accurate facts and circumstances of your case with your attorney.
The best method of finding a reputable, competent lawyer is through a referral. If you know an attorney who does not handle bankruptcy, ask them to recommend a specialist. They will tend to recommend someone that they respect. Ask any friends or relatives who may have filed bankruptcy about their past experience with their attorney. Go interview those referred attorneys to see what your comfort level is with them. Many times the initial consultation is free. Be sure you talk directly with the attorney that would handle your case, not an assistant or paralegal.
There are several reasons to hire a local bankruptcy specialist:
- Your attorney will have knowledge of the policies and procedures of your local bankruptcy court. Even though the bankruptcy law is nationwide, how things are handled, and local customs vary in each jurisdiction. Also, the state law on exemptions may dictate the guidelines of your specific case.
- Your attorney will help you with pre-filing guidance. He or She will point out things to do and things to avoid prior to filing.
- Your attorney will help you with timing issues. There are many deadlines both before and after filing that can become critical to a successful bankruptcy. Poor timing can cost you thousands of dollars. Only experience will help you avoid disastrous pitfalls.
- Your attorney can help you with tax issues. Regardless of when you file, the tax clock will always be ticking.
- Your attorney will protect you from creditor claims. Sometimes creditors will not agree with you on repayment plans, exempt property issues, fraud claims and other issues. Your attorney will know how to best shield you from these claims.
- Your attorney will help you determine the best kind of bankruptcy to file considering your individual financial circumstances.
- Your attorney will help you complete and file the bankruptcy documents and pleadings required by the Court.
- Your attorney will represent you at the 341 first meeting of creditors hearing and the planning for it.
- Your attorney will keep your filing from being denied or revoked or dismissed.
- Your attorney will guide you through the endless minefield of Chapter 11.
- Your attorney will help you propose a Plan of Reorganization that will allow you to potentially retain valuable assets, assuming the value of the assets are paid for through Plan Payments, and to hopefully to receive a discharge of all the unpaid obligations at the end of Chapter 11 Plan repayment period.
- Your attorney might guide you in the timing for filing, such as any potential re-payment of loans to non-insiders or insiders are beyond the applicable time limitations found in §547 of the Bankruptcy Code.
- Your attorney can legally assist you in legally redeploying assets from non-exempt holdings to exempt holdings.
The Bankruptcy Judge
In most cases you may never even see the US Federal Bankruptcy judge where your case is assigned. Bankruptcy Judges are appointed to 14-year terms. Most of them are well versed in the intricacies of bankruptcy law and are quite competent and conscientious. Most issues are resolved by negotiation with bankruptcy case trustees. The judges are usually called into play to make decisions over problems and disputes. The judges may make decisions on creditor’s objections to proceedings. He will approve leases and sales requests. Their decisions can be reviewed by U.S. federal judges.
Other than your attorney, the bankruptcy trustees are the real work horses in the process. In Chapter 7 cases, the bankruptcy trustee’s primary job is selling non-exempt property and distributing the proceeds to your creditors, if there are any non-exempt properties. In over 90% of Chapter 7 cases, there are not any assets that are liquidated, because all of them are exempt or not worth the trouble to liquidate. The trustee is compensated on a commission basis of how much money they collect and pay creditors, as directed by the Bankruptcy Code.
The trustees and their staffs will review your bankruptcy documents and pleadings and ask you questions in a 341 meeting (more later) to determine whether any assets can be sold to pay some or all your debts. He may also gather monies from tax refunds, or divorce property settlement you may have received and collect inheritances you may be entitled to collect in the six months after filing. He may also ask you about any payments or transfers of assets that are made within two years prior to your filing to see if he can recover additional monies for creditors.
The standing bankruptcy trustee’s job in a Chapter 13 case is a bit different from Chapter 7 cases. They also ask you questions about your assets and expenses. They’re trying to assess whether your repayment plan meets the court’s requirements and assess how likely it is to succeed. Specifically, the standing trustee’s mission is to collect the monthly payments that you make under the repayment plan and distribute them to creditors.
After your bankruptcy filing date, you probably will have very little to do with your previous creditors. Sometimes they will attend the 341 meeting, where they can ask questions on your assets and liabilities, but typically few actually do. Most contact is handled by the trustee or your lawyer. Occasionally a creditor will hire their own attorney to protect their claim, where there are substantial assets in a Chapter 13, or 7 or 11 case. After you file, all creditor’s collection activity will stop or be stayed, so you will not hear from them.
I know there is a lot of information here so my advice is to call our office at (775) 786-7600 or (775) 690-2190 anytime to set up a complimentary and confidential consultation with me at your earliest convenience. You can also visit our new business Facebook Page for more information.