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307 Albemarle Drive Civic Center
Chesapeake, Virginia 23322-5571
2425 Nimmo Parkway
Virginia Beach, Virginia 23456-9057 ...
PO Box 129
711 Crawford Street Portsmouth, Virginia 23705
100 St. Paul's Boulevard
Norfolk, Virginia 23510
PO Box 1648
150 North Main Street Suffolk, Virginia 23439
(1 st judicial district of Virginia)307 Albemarle Drive Civic Center Chesapeake, Virginia 23322
(2nd judicial district of Virginia 2425 10, Judicial Center, Nimmo Parkway, Virginia Beach, Virginia.
Norfolk, Virginia 23510
(5th Judicial Circuit of Virginia.) 150 North Main Street Suffolk, Virginia 23439
A chapter 7 bankruptcy case does not involve the filing of a plan of repayment as in a chapter 13 bankruptcy. Instead, the bankruptcy trustee gathers and sells the debtor's nonexempt assets and uses the proceeds of such assets to pay holders of claims (creditors) in accordance with the provisions of the Bankruptcy Code. Part of the debtor's property may be subject to liens and mortgages that pledge the property to other creditors. In addition, the Bankruptcy Code will allow the debtor to keep certain "exempt" property. A Homestead exemption will further protect some assets Additionally property which will not bring a reasonable return is often not attached. The trustee will liquidate the debtor's remaining assets of value and distribute the proceeds pro-rata among the debtors creditors. Accordingly, potential debtors should realize that the filing of a petition under chapter 7 may result in the loss of property.
Eligibility for debt relief under chapter 7 of the Bankruptcy Code, is subject to the means test for individual debtors. Chapter 7 relief is available irrespective of the amount of debts or the debtor's solvency.
An individual may not be able to file under chapter 7 or any other chapter, however, if during the preceding 180 days a prior bankruptcy petition was dismissed due to the debtor's willful failure to appear before the court or comply with orders of the court, or the debtor voluntarily dismissed the previous case after creditors sought relief from the bankruptcy court to recover property upon which they hold liens.
Credit counseling from an approved credit counseling agency is required within 180 days before filing, It is wise to consult a bankruptcy attorney before such Credit counseling consultation is undertaken because any information given to the counseling agency may be used to prejudice a claim for relief when filed.
One of the primary purposes of bankruptcy is to discharge certain debts to give an honest individual debtor a "fresh start." The debtor has no liability for discharged debts. In a chapter 7 case, however, a discharge is only available to individual debtors, not to partnerships or corporations. Although an individual chapter 7 case usually results in a discharge of debts, the right to a discharge is not absolute, and some types of debts are not discharged. Moreover, a bankruptcy discharge does not extinguish a lien on property.
A chapter 7 case begins with the debtor's attorney files a petition for debt relief of the debtors behalf, with the bankruptcy court serving the area where the individual lives or where the business debtor has its principal place of business or principal assets. In addition to the petition, the debtor must also file with the court: list of (1) assets and liabilities; (2) current income and expenditures; (3) a statement of financial affairs; and (4) contracts and unexpired leases; (5) a copy of the tax return or transcripts for the most recent tax year, tax returns filed during the case, tax returns for prior years that had not been filed when the case began); (6) a certificate of credit counseling and a copy of any debt repayment plan developed through credit counseling; (7) evidence of payment from employers, if any, a statement of monthly net income and any anticipated increase in income or expenses after filing; and a record of any interest the debtor has in federal or state qualified education or tuition accounts. Id. A husband and wife may file a joint petition or individual petitions.
As of April 9, 2006, the courts must charge a $245 case filing fee, a $39 miscellaneous administrative fee, and a $15 trustee surcharge. Normally, the fees must be paid to the clerk of the court upon filing. With the court's permission,
In order to complete the Official Bankruptcy Forms that make up the petition, statement of financial affairs, and schedules, the debtor must provide the following information:
A list of all creditors including addresses, and the amount and nature of their claims;
The source, amount, and frequency of the debtor's income;
A list of all of the debtor's property; and
A detailed list of the debtor's monthly living expenses, i.e., food, clothing, shelter, utilities, taxes, transportation, medicine, etc.
Married individuals must gather this information for their spouse regardless of whether they are filing a joint petition, separate individual petitions, or even if only one spouse is filing. In a situation where only one spouse files, the income and expenses of the non-filing spouse is required so that the court, the trustee and creditors can evaluate the household's financial position.
Among the schedules that an individual debtor will file is a schedule of "exempt" property. The Bankruptcy Code allows an individual debtor to protect some property from the claims of creditors because it is exempt under federal bankruptcy law or under the laws of the debtor's home state.
Filing a petition under chapter 7 "automatically stays" (stops) most collection actions against the debtor or the debtor's property. The stay arises by operation of law and requires no judicial action. As long as the stay is in effect, creditors generally may not initiate or continue lawsuits, wage garnishments, or even telephone calls demanding payments. The bankruptcy clerk gives notice of the bankruptcy case to all creditors whose names and addresses are provided by the debtor. Harassing phone calls can be prevented through the protection of the court.
Between 20 and 40 days after the petition is filed, the case trustee will hold a meeting of creditors called a 341 hearing. During this meeting, the trustee puts the debtor under oath, and both the trustee and creditors may ask questions. The debtor must attend the meeting and answer questions regarding the debtor's financial affairs and property. If a husband and wife have filed a joint petition, they both must attend the creditors' meeting and answer questions.
It is important for the debtor to cooperate with the trustee and provide financial records or documents requested. The Bankruptcy Code requires the trustee to ask the debtor questions at the 341 hearing to ensure that the debtor is aware of the consequences of seeking a discharge in bankruptcy, and the effect of reaffirming a debt. Some trustees provide written information on these topics at or before the meeting to ensure that the debtor is aware of this information. In order to preserve their independent judgment, bankruptcy judges are prohibited from attending the 341 hearing.
In order to accord the debtor complete relief, the Bankruptcy Code allows the debtor to convert a chapter 7 case to case under chapter 11, 12 or 13 as long as the debtor is eligible to be a debtor under the new chapter.
When a chapter 7 petition is filed, the U.S. trustee appoints an impartial case trustee to administer the case and liquidate the debtor's nonexempt assets. If all the debtor's assets are exempt or subject to valid liens, the trustee will normally file a "no asset" report with the court, and there will be no distribution to unsecured creditors. Most chapter 7 cases involving individual debtors are no asset cases.
The primary role of a chapter 7 trustee in an asset case is to liquidate the debtor's nonexempt assets in a manner that maximizes the return to the debtor's unsecured creditors. The trustee may also attempt to recover money or property under the trustee's "avoiding powers." The trustee's avoiding powers include the power to set aside preferential transfers made to creditors within 90 days before the petition and undo security interests and other pre-petition transfers of property that were not properly perfected under bankruptcy law at the time of the petition;
A discharge releases debtors from personal liability for most debts. A chapter 7 discharge is subject to many exceptions, debtors should consult competent legal counsel before filing to discuss the scope of the discharge. Alliance legal group attorneys will insure the maximum protection allowable under the law
The grounds for denying an individual debtor a discharge in a chapter 7 case are narrow and are construed against the moving party. The reasons the court may deny the debtor a discharge are: if it finds that the debtor failed to keep or produce adequate books or financial records; failed to explain satisfactorily any loss of assets; committed a bankruptcy crime such as perjury; failed to obey a lawful order of the court; fraudulently transferred, concealed, or destroyed property that would have become property of the estate; or failed to complete the credit counseling course
Secured creditors may retain some rights to seize property securing an underlying debt even after a discharge is granted. If a debtor wishes to keep certain secured property (such as an automobile), he or she may decide to "reaffirm" the debt. A reaffirmation is an agreement between the debtor and the creditor that the debtor will remain liable and will pay all or a portion of the money owed, even though the debt would otherwise be discharged in the bankruptcy. In return, the creditor promises that it will not repossess or take back the automobile or other property so long as the debtor pays the debt.
If the debtor decides to reaffirm a debt, he or she must do so before the discharge is entered. The debtor must sign a written reaffirmation agreement and file it with the court. Reaffirmations should be undertaken only with great caution and after consulting an attorney as to collateral effects. The attorney must certify in writing that he or she advised the debtor of the legal effect and consequences of the agreement, including a default under the agreement. The attorney must also certify that the debtor was fully informed and voluntarily made the agreement and that reaffirmation of the debt will not create an undue hardship for the debtor
An individual receives a discharge for most of his or her debts in a chapter 7 bankruptcy case. A creditor may no longer initiate or continue any legal or other action against the debtor to collect a discharged debt. But not all of an individual's debts are discharged in chapter 7. Debts not discharged include debts for alimony and child support, certain taxes, debts for certain educational benefit, debts for death or personal injury caused by the debtor's operation of a motor vehicle while the debtor was intoxicated from alcohol or other substances, and debts for certain criminal restitution orders. The debtor will continue to be liable for these types of debts to the extent that they are not paid in the chapter 7 case. Debts for money or property obtained by false pretenses, debts for fraud or defalcation while acting in a fiduciary capacity, and debts for willful and malicious injury by the debtor to another entity or to the property of another entity will be discharged unless a creditor timely files and prevails in an action to have such debts declared nondischargeable.
Alternatives to Chapter 7
Debtors should be aware that there are several alternatives to chapter 7 relief. For example, debtors who are engaged in business, may prefer to remain in business and avoid liquidation. Such debtors may want to file under chapter 11. Under chapter 11, the debtor may seek an adjustment of debts, Sole proprietorships may be eligible for relief under chapter 13 of the Bankruptcy Code.
In addition, individual debtors who have regular income may seek an adjustment of debts under chapter 13 . A particular advantage of chapter 13 is that it provides individual debtors an opportunity to save their homes from foreclosure by allowing a "catch up" of past due payments.
Your attorney should also be able to discuss non-bankruptcy alternatives such as debt workouts, debt consolidation loans, and negotiated payment plans.
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