Bankruptcy: Statement of Intention - Chapter 7
What happens to your property when you file for a Chapter 7 bankruptcy? As previously discussed, Chapter 7 bankruptcy is a “liquidation process.” Generally speaking, most of your property is going to be sold to pay off your creditors. This also applies for property in which your creditors have a “secured interest.” A secured interest means that your creditors have a right to reclaim the property itself to satisfy your debt. The most common example of a secured interest is a car loan. If you default on your car loan, your car company has the ability to reposses your vehicle.
However, you may be able to keep your vehicle in a Chapter 7 bankruptcy. This is accomplished through a specific document that is filed with your bankruptcy paperwork. So what are your options?
OPTION ONE: Surrending Your Vehicle
The first, and most common option, is to surrender the vehicle. Many people are unable to afford the car loan. That is the primary reason why people turn to bankruptcy. Bankruptcy will not necessary keep your vehicle either unless you are able to come to an understanding with your car company. Surrendering your vehicle allows you to speed along the process and begin your fresh start much sooner. However, this option is not ideal if you need your vehicle.
OPTION TWO: Re-executing Your Car Loan
The second option is to agree to be bound by your car loan even after the bankruptcy is over. This is a good option if your vehicle is not exempt under the bankruptcy laws and you still need your vehicle. By re-executing your car loan, you are agreeing to be personally liable for the loan even after the bankruptcy is over.
However, you are not necessarily required to keep the same terms of your previous loan. During the bankruptcy process, you can negotiate with your lender to secure more favorable terms.
OPTION THREE: Informal Agreement to Pay
Some creditors may be willing to work out an agreement whereby you keep the vehicle and do not have a written contract for the loan. This option is a good idea if you want to avoid personal liability for the loan going forward, and want to keep using the vehicle. However, there are several downsides to keeping the property without reaffirming your debt. This option can harm your credit rating and make future loans harder to obtain.
OPTION FOUR: Paying off the Car Loan
The final option that is available to you is to pay off the remaining balance of your car loan. This option has been previously discussed in a separate article. This allows you to keep the vehicle and to improve your credit score. However, many find it difficult to come up with the extra money to pay for the property.
Why You Need a Lawyer
Given the number of options available and the consequences of each option, it is important that you discuss your bankruptcy options with a local lawyer. The lawyer can advise you as to which of these options are best for you, and how you can maximize the fresh start that you are obtaining from a bankruptcy. Given the complexity of bankruptcy, it is essential that you seek help from a lawyer prior to filing or negotiating with your creditors. There are also several deadlines in which you have to file this paperwork with the court. Failure to file the appropriate paperwork with the court may result in the seizure of your property.
Bankruptcy: What to do prior to filing.
So you want to file for bankruptcy? Before you file, there are some things you need to know. Many people who file for bankruptcy don’t realize that there are federal laws that prohibit you from doing certain things before you file. Violating these rules may lead to your bankruptcy case being dismissed. A dismissal allows your creditors to continue collecting on your debt. Follow these steps in preparing for filing for bankruptcy.
Do Not Transfer Property to Family
Don’t do it. Transferring your car or your real estate to anyone prior to bankruptcy may violate several laws. The court has the ability to declare that those transfers were fraudulent. This can have a serious impact on both you and your family. Bankruptcy courts will “look back” over your finances for a period of time prior to your application to make sure you are not misleading your creditors or hiding assets. Not only could this type of activity result in your debt not being discharged, but you may be guilty of a crime.
File Your Tax Returns
Federal and state governments are heavily involved in the bankruptcy process. Failure to file your tax returns may result in tax liens and a more thorough examination of your bankruptcy application. As a result, failure to file your tax returns can also delay your bankruptcy proceeding. The trustee has the ability to prolong or even dismiss your case for failure to file tax returns.
Don't Run Up Your Debt
There are some people who decide, prior to filing for bankruptcy, to intentionally incur additional debt that they have no intention to pay for. This is fraud. The court has the ability to declare that you will still be on the hook for that debt. Furthermore, you could be investigated for criminal proceedings.
Gather Financial Paperwork
For each debt that you owe, you should begin preparing any documentation related to those debts. For example, if you owe credit card debt, obtain the credit card agreement and a statement of accounts. If you have a mortgage, get your mortgage agreement and an accounting of how much is remaining on your mortgage. It is also important to obtain proof of income for your family members such as paystubs and tax returns. This information will be invaluable for your attorney and will save time.
Contact a Lawyer
Bankruptcy is a complicated process. As evidenced above, creditors have a number of opportunities to examine your finances. If you have been moving debt around or incurring additional debt, you may not be eligible for a discharge and could remain on the hook for the debt. Therefore, it is important that you speak with a lawyer to avoid these, and other, mistakes.
Bankruptcy: What to expect at your 341 Meeting
You’ve chosen a lawyer, decided on which chapter of bankruptcy is best, and have filed your initial paperwork with the court. What comes next? There are several steps in the bankruptcy. One of the first steps is a meeting known as the “341 Meeting.” It is also known as a “Creditor’s Meeting.”
What is a 341 Meeting?
A 341 meeting is a hearing held by the trustee who has been assigned to your case. The meeting is an opportunity for the trustee and for any creditors to ask you a series of questions regarding your eligibility for bankruptcy. Your lawyer should prepare you in advance by providing you with a list of questions that the trustee will be asking. If there are any issues with the paperwork that you have filed with the court, the trustee will likely raise those issues at the 341 hearing. Your bankruptcy proceeding cannot go forward until you have satisfied the trustee’s requirements for the 341 meeting.
Who will be present?
There are a number of different people that could be present at your 341 meeting. At a bare minimum, you must attend. The trustee who has been assigned to your case will also be in attendance, as will your lawyer. Representatives from your creditors can also make an appearance to challenge your bankruptcy paperwork and ask questions regarding your finances. The last group that could be present at your 341 meeting is the Department of Justice (“DOJ”). The DOJ gets involved with 341 meetings if there are allegations of bankruptcy fraud. The DOJ takes such allegations very seriously.
What do you need to bring?
Every jurisdiction is unique, but there are a few things you should bring with you to your 341 meeting. You should have several forms of ID with you including your driver’s license, social security card and passport. You will also need to bring a completed set of questionnaires that will be provided to you by your attorney. All of this paperwork will need to be provided to the trustee for their review. Finally, you will likely be required to bring proof of income and your bankruptcy paperwork. There may be other paperwork required depending on the type of bankruptcy you have filed and any objections that have been made by the trustee.
Why you need a lawyer.
You absolutely need a lawyer for the 341 Meeting. The purpose of the 341 Meeting is to allow the trustee and the creditors an opportunity to confirm that you have followed all the rules. Failure to follow the relevant bankruptcy rules could result in your case either getting delayed or dismissed. Worst case scenario; the DOJ could even get involved. Therefore, make sure you have your attorney prepare you for the 341 Meeting and walk you through what is likely to happen.
Different Types of Chapter 7 Bankruptcy
Chapter 7 - No Asset
There are two major types of Chapter 7 bankruptcies. Each type has its own unique procedures. A "no asset" case is one in which you are allowed to keep all of your personal property. Each jurisdiction has laws called "exemptions" which allow you to keep specific types of property, such as tools used for your business, clothes and household goods. A no asset case is the quickest type of bankruptcy, as the court does not have to sell off any of your property.
Chapter 7: Asset Case
Not all property is exempt. If you own non-exempt property, you have an asset case. For example; you have an asset case if you are gifted a speed boat valued at Twenty Thousand Dollars ($20,000.00). It would be unfair to allow you to keep this luxury item without paying your creditors. In certain circumstances, that speed boat would either need to be sold by the court or you would have to pay for the value of the boat to keep it. This is an asset case, and these cases can be very complicated.
Why you need a lawyer.
A bankruptcy lawyer will be more familiar with the exemptions where you live. A lawyer will be able to help you maximize the amount of property you are allowed to keep as part of your bankruptcy proceedings. Contact a lawyer in order to get more information regarding the type of bankruptcy that is best for you.
Bankruptcy Basics: Chapter 7 and Chapter 13
WHAT IS BANKRUPTCY?
Do you have credit card bills? Are utilities going unpaid? Are you afraid of being evicted or losing your home? If you answered yes to one of these questions, bankruptcy may be right for you. Bankruptcy allows you to get a fresh start by removing your personal liability for certain types of debt. Bankruptcy can be a long process or a short process, depending on your income and the amount of property you own. The two most common types of bankruptcy are Chapter 7 and Chapter 13.
CHAPTER 7 BANKRUPTCY
A Chapter 7 bankruptcy is available to you if you make below a certain amount of income. This type of bankruptcy is a relatively fast process, and typically takes one to four months. There are two subtypes of a Chapter 7 bankruptcy that I will talk about at a later time; asset cases and no asset cases.
CHAPTER 13 BANKRUPTCY
A Chapter 13 bankruptcy is a much longer process than a Chapter 7 bankruptcy. This type of bankruptcy is for you if you make above a certain level of income. This type of bankruptcy can take between three to five years to complete. You set up a payment plan with the court during this type of bankruptcy, and that payment plan is used to pay down your debts.
WHY YOU NEED A LAWYER
Bankruptcy is complicated. There are dozens of documents that need to be filed with the court and several things you must do before you can qualify. If you fail to properly complete the paperwork, your bankruptcy may be dismissed and you may still be on the hook for your debts.
You also need a lawyer to help you determine which type of bankruptcy is best for you. If you are considering bankruptcy, contact a lawyer.