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Bankruptcy - Chapters 7 and 13 - A General Overview

Bankruptcy - Chapters 7 and 13 - A General Overview
"""The purpose of this article is to provide the reader with an accessible, non-technical overview of bankruptcy. Typically, a person contacts an attorney if he or she is contemplating filing for bankruptcy, typically due to an excessive amount of credit card debt or because the prospective client is behind on his or her mortgage payments. In either case, the initial stage is to consult with a qualified attorney who is well-versed in all aspects of bankruptcy law. Regarding the client's issue, the attorney will conduct a thorough case history and fact-finding. Does the individual own a home? Is the customer wed? Do you have children? Does the consumer own or lease any automobiles? Are there funds available in the bank, or in equities, bonds, or mutual funds? Is a retirement account available? (IRA or 401k, etc). What is the revenue of the client? All of these factors and more must be known by the attorney in order to make an informed decision regarding the type of bankruptcy that can or cannot be filed: Chapter 7 or Chapter 13? (I am leaving out Chapter 11 for now because that is for enterprises generally and will be the subject of another article).

After the attorney has gathered all pertinent facts and the client has produced documents to support those facts, a bankruptcy petition can be drafted, which includes all of the information listed above, as well as additional information. What types of property are exempt or protected by law? Can the client retain the property? His or her vehicle? These are essential concerns that must be answered prior to filing the petition. What about refunds on taxes?

After the lengthy bankruptcy petition has been drafted, the client(s) sign the petition. The petition is then routinely filed electronically with the Federal Bankruptcy Court (located in Central Islip on Long Island), that is, it is uploaded onto the Court's Server.

At the time of filing, a case number is assigned to the client's case, and, more importantly, a trustee is appointed to supervise the bankruptcy case. Approximately six weeks after the petition is filed, the client and his or her attorney meet with the trustee at the Court - not in a courtroom, but rather, at the courthouse building, in a room with a table where many other debtors are typically waiting for their turn to meet with the trustee. This meeting is known as a 341 creditors' meeting. By elevating his or her right hand and swearing to tell the truth, the client is sworn in. The attorney is seated directly next to his clients and introduces himself or herself for the record. The purpose of the meeting is for the trustee to gather information to determine if the petition is accurate and if everything is in order; for example, in the case of a chapter 7, is there anything the trustee can liquidate to pay off the client's debts? The attorney, well-versed in this complex area of law, informed the client of the status of any non-exempt property, i.e., property that could be sold by the trustee, before the client filed for bankruptcy. In New York, for instance, if a client possesses a car worth $8,000, the trustee could sell it to pay off some of the client's debts, because a client can only protect up to $2,400 in his or her automobile. Other significant exemptions include those that safeguard a client's residence. In most cases, the meeting of creditors lasts no more than ten minutes; however, in Chapter 13 cases, in which the client repays some or all of his debts over three to five years, the meeting can and often does last longer.

In Chapter 7, where the aim is to eliminate all dischargeable debts (most student loans, IRS, child support, and criminal fines are not dischargeable), the client receives his or her discharge several months after meeting with the trustee. If the trustee were to object to such a discharge, the objection would occur some time after the meeting, and the client's counsel would be required to oppose the trustee's objection. In the overwhelming majority of instances, however, the case proceeds smoothly and the client is released from all dischargeable debts. In the case of Chapter 13, the client attends a meeting with the trustee, as in Chapter 7, but there is a subsequent hearing, known as a """"confirmation hearing,"""" where the court gives its approval to the proposed """"plan"""" that specifies what percentage of the client's debts are to be repaid and what the monthly payment is to be paid to the trustee (over a 3 to 5 year """"plan""""). Usually, the client is not required to attend the hearing, but there are occasions when they must. Chapter 13 is more intricate than Chapter 7 for a variety of reasons. First, the attorney must devise a plan for the repayment of some or all of the client's debts. Second, the client and the attorney maintain a long-term relationship, and the file remains open and is subject to court review; for instance, if the client's income fluctuates significantly, the plan may be modified. During the duration of a case, tax refunds may have to be paid to the trustee. There are numerous matters to address in Chapter 13 that are unnecessary in Chapter 7.

The client's expenses are proportional to the differing levels of difficulty of Chapters 7, and 13. As for attorney's fees, a Chapter 7 bankruptcy typically costs between $1,500 and $2,500, in addition to filing fees, depending on a number of variables, including debt level, number of creditors, and other factors. The fees for a Chapter 13, which is more complicated, can range from $2500 to $4000 plus filing fees. Obviously, these ranges are merely approximations and can alter based on the particular facts and circumstances of each case, but they do serve as a general guideline for the reader.

There is much more to discuss, as Bankruptcy Law is complex, and Bankruptcy cases, petitions, meetings of creditors, motions, confirmation hearings, and dischargeability issues are vast in scope, but the PROCESS of bankruptcy is relatively simple to comprehend, and that is what I wished to convey to the reader in this article.

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"Bankruptcy - Chapters 7 and 13 - A General Overview" was written by Mary under the Finance / Wealth category. It has been read 162 times and generated 0 comments. The article was created on and updated on 31 May 2023.
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