Chapter 7 Bankruptcy
The Main Objective
Secured Debts
Reaffirmation Agreement
Redemption
Court Hearing in Your Bankruptcy Case (called the Meeting of Creditors)
The Trustee
Contested Bankruptcy
Full Disclosure
Tax Refunds
Your Credit Record
Cost to file Chapter 7
THE MAIN OBJECTIVE
To get a Discharge from the Court on all of your "dischargeable debts". A
discharge means you do not owe a debt. Not all debts are legally dischargeable. For
example, income taxes that are less than three years old are nondischargeable. Likewise,
child support, student loans, and spousal support are nondischargeable. Certain other
debts are nondischargeable.
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SECURED DEBTS
Some creditors have a right to repossess assets unless they are paid. Auto loans
are usually secured by the pledge of your car title as collateral to secure the car loan.
Mortgages against real estate are secured by a lien against real estate. Household goods
can also be secured against a loan. Secured creditors can repossess cars, household
goods, and foreclose on home mortgages if regular payments are not made on these loans.
There are three choices to make as to secured debts in a bankruptcy case:
1. Surrender the collateral (the car or house) to the creditor; or
2. Reaffirm the debt with the creditor to keep the collateral (explained below); or
3. Redeem the collateral from the creditor (explained below).
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REAFFIRMATION AGREEMENT
If you have a secured debt, you are required to state, in writing, as a
part of your bankruptcy petition whether you intend to surrender, reaffirm or redeem the
collateral pledged to secure the loan. This "Statement of Intent" is sent to each creditor
and your stated intent should be performed within roughly 45 days.
If you intend to reaffirm on the debt, that means you intend to keep the collateral and
keep making regular monthly payments of principal and interest until the debt is paid in
full. Reaffirmation agreements are voluntary and they require the creditor's agreement
to allow you to reaffirm the debt and keep the collateral. This does not always happen.
Some creditors refuse to agree to reaffirmation. In that case, you must surrender the
collateral to the creditor. It is important that you understand that you will likely lose the
collateral if the creditor refuses to agree to the reaffirmation agreement.
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REDEMPTION
The bankruptcy laws allow a debtor to keep collateral by paying the creditor the
fair market value of the collateral pledged to secure a debt. This is very rare since it
requires the debtor to pay a lump sum of money to the creditor equal to the fair market
value. You can sometimes borrow the lump sum from a new lender. If you can't borrow
the lump sum, then you may not be able to redeem the vehicle. We can help you in
redeeming vehicles by referring you to a lender.
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COURT HEARING IN YOUR BANKRUPTCY CASE
(called
the
Meeting
of
Creditors)
In each bankruptcy
case, the law requires a Court appointed "Trustee" to question each debtor about his or
her financial affairs. You must attend a Court hearing for this and bring a picture ID
with your social security number to your hearing. You must also bring to your hearing
the following documents: tax returns for the last two years, your car titles, pay stubs,
retirement account statements and bank statements for the month in which your
bankruptcy is filed, any life insurance policies you have and loan closing statements for
loans taken within the last three years. Other documents may also be required by the
Trustee.
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THE TRUSTEE
A Trustee is a local attorney who is appointed by the United States Trustee (an arm
of the United States Dept. of Justice) to administer your bankruptcy case. The Trustee
has certain powers, as a matter of law, to order your full and complete cooperation in your
bankruptcy case. There are numerous powers available to a Trustee. It is important that
you follow all instructions given to you to successfully complete your bankruptcy case.
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CONTESTED BANKRUPTCY
Your right to a discharge in bankruptcy can be contested (challenged) by
the Trustee in your case, by the United States Trustee, by any one of your creditors and
by the Bankruptcy Court Judge. Very few bankruptcy cases are contested.
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FULL DISCLOSURE
The most important requirement in bankruptcy is that you make a full and
complete disclosure of all debts and assets you have. Concealing assets and lying to the
Bankruptcy Court is a federal crime. Always tell the truth to your attorney and to the
Trustee and the Court. Bankruptcy fraud cannot be tolerated.
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TAX REFUNDS
The Trustee in your bankruptcy case has the power to take your tax refund and
distribute it to your creditors. If the Trustee asks for your tax return and tax refund, you
must cooperate in full. Failure to do so can cause the Trustee to contest your right to
have your bankruptcy debts discharged.
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YOUR CREDIT RECORD
Bankruptcy is allowed by law to be reported on your credit report for ten
years from the date you filed your bankruptcy case.
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HOW MUCH DOES IT COST TO FILE CHAPTER 7?
Currently Court costs are $299.00. This is required in order to file a case with the Court.
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Call 937-275-7170 or TOLL FREE 1-800-789-7170 for a FREE
Consultation, or complete our online form.
This is intended to give you some information about bankruptcy (Chapter 7). There is much
more law that relates to bankruptcy and we have volumes of books that deal with
bankruptcy. We also take continuing education courses in bankruptcy law to keep up
with the new developments. As such, please ask us any other questions you may have.
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