A Chapter 7 Bankruptcy proceeding is often known as a fresh start for individuals, or a liquidation for corporations.
In an individual Chapter 7 Bankruptcy Case a person, or married couple, will not be liquidated! The Code allows for the debtor to keep certain property, pursuant to the law of “exemptions,” as exempt property – exempt from the hands of creditors – things you get to keep. People can file for bankruptcy and keep property they need to move forward with their life. The provisions are rather liberal and in most cases an individual, or married couple filing together, will not lose any personal property. However, you still must pay your monthly payments as they come due for a mortgage or a car. Eliminating credit card and other debt may help you to have funds sufficient to pay your mortgage. However, if you are behind in mortgage payments and want to try to keep your home, and you can’t pay a lump sum to bring your past due payments current, Chapter 13 might be the way to go for you, to re-structure your past due payments.
A Chapter 7 allows individuals to move forward with their life, eliminating past debt which has encumbered them to the point where they can no longer contribute to the gross capital gain of our society. Often people ask if a Chapter 7 will ruin their credit. My response is, “don’t always consider how you look when you’re sick.” In other words, get better first, and then fix your looks. Someone who needs to file for bankruptcy probably already has bad credit. They need to get rid of debt as soon as possible, obtain a fresh start, and move forward in a better financial position. In fact, Bankruptcy resolves the history of bad credit and creates a path towards improved credit. Further, the issue of credit worthiness is not written in law. It is up to each and every individual lender to decide who, how, and when they will lend money by credit. When an individual files for bankruptcy they are often prevented from filling again for a considerable time. People who have no debt and no option to file bankruptcy again for some time may, in the eyes of lenders, be more credit worthy then someone with outstanding credit card debt, and other debt, and no prohibition of their right to file a Bankruptcy Petition. A September 2012 NY TImes article discussed a waiting period of two years from discharge of a Chapter 7 Case to qualification for a loan to purchase a new home.
In order to file a Chapter 7 Bankruptcy, the client must complete our information worksheet, which we will provide to you. Further, we provide a documentation checklist as a guideline for the documents that will be necessary to obtain bankruptcy relief. Please note that in order to file a petition for relief pursuant to either Chapter 7 or Chapter 13 of the United States Bankruptcy Code, your tax filings must be current. There are no exceptions to this requirement. If you have not filed tax returns that have come due, you must immediately contact your accountant and move forward in that regard. I am certainly willing to consult with you, but you will not be able to file for protection from creditors if this requirement has not been met. It’s important to discuss tax liability with Mr. Weinberg – certain taxes can be discharged under Bankruptcy Law, but this is complicated and involves analysis of time periods. Finally, there is an important notice and disclosure required by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. We will provide a copy of the notice to you and you must review that document so that you are fully informed of the provisions contained therein. We review all those provisions with our clients.
In order to file for protection under the United States Bankruptcy Code, you also must complete an approved credit counseling course prior to filing. We will provide you a reference for credit counselors. Many of the programs can be completed within an hour online or by telephone. They will send me a certification of completion of the course, and we will note that in your bankruptcy legal documents.
Of course this seems complicated, but our Law Office has an organized, effective system to explain the process and lead you through it in an organized fashion. I look forward to assisting you with your financial difficulties. Kindly call my office to schedule an informative, helpful consultation so that we can evaluate your options.