If you are considering bankruptcy and considering filing a petition for Chapter 7 Bankruptcy, you may be wondering what the consequences are or what exactly happens during the process and after the fact. There are many steps and requirements in the process, such as income limits, that a debtor takes initially to file a petition, but most importantly here are some things to know about filing Chapter 7 Bankruptcy.
Unlike Chapter 13, Chapter 7 does not involve the filing of a plan of repayment. Assets are gathered by the bankruptcy trustee and nonexempt assets are sold and the proceeds are used to pay creditors. Property owned by the debtor may be subject to liens and/or mortgages that pledge the property to other creditors. The debtor may be able to keep certain exempt property. Potential debtors should realize that filing Chapter 7 could result in the loss of 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 state the debtor resides in. However, you should always consult an attorney to determine the exemptions available.
Filing Chapter 7 stops most collection actions against the debtor or the debtor’s property. However, this may only be for a certain time, but for as long as a “stay” is in effect, debtors may not call, continue lawsuits, wage garnishments or even phone calls. A debtor must provide all contact information of creditors to the bankruptcy clerk in order for these actions to stop.
There is a $245 filing fee, a $75 miscellaneous administrative fee and a $15 trustee surcharge. Normally, these are paid upon filing. However, with the court’s permission, debtors may pay installments. Installments are limited to 4 and the final payment must be made no later than 120 days after filing the petition. In the event that a debtor’s income is 150% less than poverty level the court could waive that the fees be paid.
The above is brief summary and basic bankruptcy information for what happens when you file chapter 7 and should be used for information purposes only. You should always consult with an attorney FIRST. Find an attorney who specializes in Chapter 7 Bankruptcy filing here.