Chapter 7, or a "straight" bankruptcy, is the most common type of bankruptcy. It eliminates most unsecured debts and gives you a fresh start. Some debts, such as amounts owing to an ex-spouse under a divorce degree or divorce settlement, are not discharged in Chapter 7. Other debts, such as income taxes, may be discharged under certain circumstances. Vanden Bos & Chapman, LLP can review your tax situation to determine if any of your tax debts can be discharged. Student loans are not dischargeable, except in rare cases. Chapter 7 usually lasts approximately 90 to 120 days from the day you file the bankruptcy to the date you get your discharge. The attorneys at Vanden Bos & Chapman, LLP have experience handling both simple and complex Chapter 7 bankruptcy cases. In Chapter 7, you are entitled to keep certain types of your property (known as "exemptions") up to specific maximum dollar values. See our list of allowed exemptions for an idea of what property is protected. One of the services that Vanden Bos & Chapman, LLP can provide to you is a review of your assets and the exemptions available to you. Vanden Bos & Chapman, LLP can also provide "exemption planning" to help you maximize the property and assets you can retain when you file bankruptcy.
In a Chapter 7 bankruptcy, a Trustee is appointed to review your financial affairs and assets. The Trustee has the power to sell ("administer") assets not included in the allowed exemptions. If the Trustee determines that there are no assets available for him or her to sell (this happens about 95% of the time), the case is reported as a "no asset" case and it is closed. The Bankruptcy Court will issue your discharge about 60-90 days later. Usually, all debts listed in the bankruptcy are discharged and the creditors are forever prohibited from trying to collect those debts from you.
Will I be able to keep all or most of my assets if I file for bankruptcy?
You can keep your assets to the extent the equity in the assets is within the exemption allowances available under the law to debtors. In many cases, clients are permitted to keep their personal belongings, including their homes, cars, and all household goods. If you owe more on your house and car than they are worth, the bankruptcy Trustee will not sell them because there would be no money left over after the sale to pay your creditors. If you have equity in your house, car, and/or personal property, exemptions may protect your property. Vanden Bos & Chapman, LLP's attorneys can help you implement strategies to save property that you own free and clear of liens, and ensure that you claim all of the exemptions that are available to you.
Can I transfer or dispose of my possessions before I file bankruptcy?
No! If you give away, sell for less than fair value, or transfer an asset to someone before you file for bankruptcy, the bankruptcy Trustee may be able to reverse that transfer, and any exempt portion of the asset that may have existed before the transfer will be disallowed when the asset is recovered by the Trustee. Transfers made within one year of bankruptcy may be grounds for the Trustee to disqualify you from receiving your bankruptcy discharge. If you have already taken such actions, you should speak with an attorney at Vanden Bos & Chapman, LLP to determine if steps can be taken to undo the harm you may suffer because of an improper transfer.
I have previously filed for bankruptcy before and I am in a desperate financial crunch. Can I file again?
Under bankruptcy law, you can only file a Chapter 7 bankruptcy if you have not received a bankruptcy discharge within the last 8 years (the 8-year period runs from your previous filing date). You can file a Chapter 13 after receiving a Chapter 7 discharge, but you cannot receive a discharge in Chapter 13 if you have received a discharge in a Chapter 7 case filed within 4 years of the petition date of your Chapter 13. Just because you cannot get a discharge in a second Chapter 13 does not mean that you are ineligible to file a second Chapter 13. There may be legitimate reasons for filing a second Chapter 13 even if a second discharge of debts is not possible. For example, if you are behind on your home payments, filing a second Chapter 13 will stop a foreclosure and make it possible for you to catch up on your payments during the course of your Chapter 13, thereby saving your house. In this case, the goal of the Chapter 13 would be to preserve your ownership interest in your house, rather than a second discharge of debts.
No, Chapter 7 does not discharge all of your debts. Chapter 7 is designed to discharge unsecured debts like medical bills and credit card debt. Other debts, like student loans, some types of taxes, and debts associated with driving under the influence of intoxicants generally cannot be discharged in Chapter 7. Debts incurred through fraud or false pretenses may not be dischargeable in Chapter 7. Chapter 13 can discharge some of the debts that Chapter 7 will not. You should meet with an attorney at Vanden Bos & Chapman, LLP to determine the exact nature of your debts and which bankruptcy chapter is the best fit for you.
No. Either spouse can file alone. If you and your spouse are both jointly obligated on certain debts, your bankruptcy will prevent the creditor from trying to collect from you, but the creditor can still attempt to collect from a non-filing spouse. However, in Chapter 13 cases, it is sometimes possible to put a provision in the Chapter 13 plan that prohibits creditors from collecting joint debts from a non-filing spouse.
I keep hearing that a Chapter 7 Trustee will take my "non-exempt" property. What is my "non-exempt" property?
When you file a Chapter 7, the Trustee is only interested in property that the Trustee can sell to generate proceeds to pay unsecured creditors. If you own a car worth $4,000, and you still owe $4,000 to the lender, the Trustee won't take the car because he would have to pay all of the sale proceeds to the car lender and there would be nothing left for unsecured creditors.
Public policy mandates that no one should be deprived of all of his or her property, and therefore the Oregon legislature has created certain "exemptions." Exemptions are a dollar value in certain property that is protected from all of your creditors, including a bankruptcy Trustee. If the value of your property is within the exemption limits, the Trustee will not take and sell the "exempt" property. See our list of allowed exemptions for an idea of what property is protected. One of the services that Vanden Bos & Chapman, LLP can provide to you is a review of your assets and the exemptions available to you. Vanden Bos & Chapman, LLP can also provide "exemption planning" to help you maximize the property and assets you can retain when you file bankruptcy.
A "secured" debt is a debt where you have pledged property (pledged property is known as “collateral”) to ensure your payment of the debt. In other words, if you are unable to pay the debt, the lender can take the collateral and have the collateral sold to generate funds to pay the debt. Common examples of secured debt are your mortgage loan (secured by your house) and your car loan (secured by your car). Sometimes household goods (TV, appliances, etc.) can also be secured to pay the debt owed to the seller of the goods. The repossession and sale of the collateral does not necessarily result in payment in full of the debt. If the sale of the collateral does not result in full payment of the debt, the amount of the shortfall (known as the "deficiency") in most cases will still be owed to the creditor, unless the deficiency is later discharged because of a bankruptcy filing.
Do I have to get a certificate from a credit counseling agency to be qualified to file bankruptcy?
YES. No individual may be a debtor in bankruptcy unless the individual first undergoes a consumer credit counseling consultation and receives a certificate of completion. The certificate must be presented to the Bankruptcy Court at the time the bankruptcy is filed or the Bankruptcy Court will refuse to accept the bankruptcy petition. The requirement for "consumer" credit counseling applies even when the debtor's debts are primarily business related and the reasons for the debtor's financial distress have nothing to do with "consumer" debt issues. The counseling session must be taken from an "approved" counseling agency. The consumer is obligated to pay a fee for the session. The session can be done online, via telephone, or in person. The cost is generally between $35 and $75. See the link below to the U.S. Trustee's website for an up-to-date list of the current “approved” agencies.
Do I have to complete a "personal financial management course" as a condition to getting a Chapter 7 discharge?
Yes. A “personal financial management course” (sometimes called a debtor education course) must be taken before the scheduled date for entry of the bankruptcy discharge from an "approved" counseling agency. If the debtor fails to take the debtor education course on time, the bankruptcy case will be closed without the entry of a discharge. While in some instances it may be possible to reopen the case for purposes of filing a certificate of completion of the debtor education course, there is no guarantee that the Bankruptcy Court will reopen the case if the case has been closed without entry of discharge due to the debtor's failure to take the debtor education course on time. Even if the case is reopened, the debtor must pay another filing fee for reopening the case once it has been closed. It is therefore important that every debtor in bankruptcy complete the debtor education course well ahead of the scheduled deadline to avoid the possibility of closure of the case without discharge. The Debtor is obligated to pay a fee for the debtor education course. The course can be taken online, via telephone, or in person. The cost is generally between $35 and $75. See the link below to the U.S. Trustee's website for an up-to-date list of the current “approved” agencies.
Under the Bankruptcy Code, a debtor with primarily consumer debts is ineligible for Chapter 7 if his or her income is above a certain level (based on the median income of the state of residence), AND if allowed expenses exceed certain guidelines. The process for evaluating a debtor's income and expenses to determine if the debtor qualifies for Chapter 7 is a complicated analysis and should be done in consultation with a skilled bankruptcy attorney. Information on the standards used can be found at the U.S. Trustee's website link below. If you do not "pass" the requirements for the Chapter 7 Means Test, you will probably have to file a Chapter 13. You should consult a lawyer at Vanden Bos & Chapman, LLP for guidance through the complicated process of determining if you pass the Means Test for Chapter 7 bankruptcy. In some instances, it may be possible, with appropriate planning, for a debtor to improve his or her chances of passing the means test. The possibility of improving your chances of passing the means test is another reason to seek the advice of a skilled bankruptcy lawyer as soon as you encounter financial difficulties and before you make any decisions or dispose of any assets. It may be that your actions, particularly in disposing of assets, will hurt your chances of passing the means test as well as hurt your chances of achieving a discharge in a subsequent bankruptcy case.