How does Chapter 7 liquidation work?
In a Chapter 7 case, the debtor must relinquish his or her nonexempt property to a bankruptcy trustee, who then converts the property into cash by selling it and pays the debtor’s creditors from the sale proceeds. In return, the debtor receives a Chapter 7 discharge of certain debts if he or she is eligible for such a discharge, pays the filing fee, completes a personal financial management course and obeys the court’s directives.
Are all debtors automatically eligible for a Chapter 7 discharge?
No. A debtor may not be eligible for a discharge under Chapter 7 if he or she has been granted a discharge in a Chapter 7 case within the last eight years. Debtors who engage in certain fraudulent conduct related to the bankruptcy or their financial situation also may not be eligible for discharge. In addition, if the debtor refuses to answer questions or obey orders of the bankruptcy court, the court may refuse to grant a discharge. There is also a “means test” that must be passed before a Chapter 7 can proceed.
May a husband and wife file jointly under Chapter 7?
Yes. A husband and wife may file a joint petition under Chapter 7. If a joint petition is filed, only one set of bankruptcy forms is needed and only one filing fee is charged.
Does my spouse have to file for bankruptcy if I do?
No. However, the spouse that does not file will not receive the benefits of bankruptcy. In other words, if the non-filing spouse is jointly liable on certain debts, he or she will remain liable for those debts even if the filing spouse benefits from the automatic stay in Chapter 7 bankruptcy. On the other hand, the non-filing spouse will not have bankruptcy noted on his or her credit report.
Can my domestic partner and I file for bankruptcy together?
No. If you live with a significant other but are not legally married, you cannot file for bankruptcy together, even if all bills are in both of your names. In such cases, each one of you would have to file a separate bankruptcy petition.
Will a person lose all of his property if he files under Chapter 7?
Under the state and federal laws, certain properties are declared to be exempt and cannot be taken by a person’s creditors, except those with valid mortgages on the exempt property. A debtor is allowed to keep his unmortgaged exempt property in a Chapter 7 case and must turn only his nonexempt property over to the trustee in the case.
Do I need an attorney to file for bankruptcy?
Although you do not legally need an attorney to file for bankruptcy, the bankruptcy laws are complex, and professional help is strongly advised. Competent legal representation can prevent you from experiencing even further financial disaster, such as the loss of your home and other valuable property, as well as set your finances straight for the future.
Will bankruptcy stop a wage garnishment?
Yes. Some of the money garnished from your paycheck may even be returned to you, depending on how much was garnished and when it was garnished. If your wages are currently subject to garnishment, a Notification of Stay must be mailed to the creditor and your employer in order to stop the garnishment after your bankruptcy petition is filed.
Will creditors stop harassing me if I file for bankruptcy?
Yes. When you file for bankruptcy, an “automatic stay,” which stops most collection actions against you, arises by operation of law. However, filing a petition does not stay certain types of actions, and the stay may only be for a limited period. As long as the automatic stay is in place, creditors may not initiate or continue lawsuits against you, garnish wages or contact you demanding payments.
When must a person go to court in a Chapter 7 case and what happens there?
The first court appearance will be about a month after the case is filed for a hearing called the “meeting of creditors.” At this hearing, the debtor will be put under oath and questioned about his money, property and debts by the trustee.
In many Chapter 7 cases, no creditors appear in court; however, if a creditors does make an appearance, he or she will be allowed to question the debtor.
Currently, due to COVID-19, all hearings in the Northern District of Georgia are being held by phone.
What debts are not released by a Chapter 7 discharge?
All debts of any kind or amount, including debts incurred in other states, are released by a Chapter 7 discharge, except those listed below. The following types of debts cannot be discharged under Chapter 7:
- Debts for certain taxes, including taxes that became due within the last three years;
- If the creditor files a complaint and if the court so rules, debts for obtaining money, property, services, or credit by means of false pretenses, fraud, or a false financial statement (included here are certain debts for luxury goods or services and for certain cash advances made within 60 days before the case is filed);
- If the creditor files a complaint and if the court so rules, debts for fraud, embezzlement, or larceny;
- Debts for alimony, maintenance or support, with certain very limited exceptions;
- If the creditor files a complaint and if the court so rules, debts for intentional or malicious injury to the person or property of another;
- Debts for certain fines or penalties;
- Debts for student loans, unless not discharging the debt would impose an undue hardship on the debtor and his or her dependents;
- For death or personal injury caused by the debtor’s operation of a motor vehicle if such operation was unlawful because the debtor was intoxicated;
- Debts that were or could have been listed in a previous bankruptcy case of the debtor in which the debtor did not receive a discharge;
- Debts arising from any act or fraud or defalcation while acting in a fiduciary capacity committed with respect to any depository institution or insured credit union;
- Debts which arose from the debtor’s malicious or reckless failure to fulfill any commitment to a federal depository institutions regulatory agency regarding the maintenance of capital of an insured depository institution;
- Any payment of an order of restitution issued under Title 18, United States Code (added by the Violent Crime Control and Law Enforcement Act of 1994);
- Loans incurred to pay federal taxes that would be nondischargeable pursuant to ‘523(a)(1);
- Fee or assessments that become due after the filing of a petition to membership associations with respect to the debtor’s interest in a dwelling unit that has condominium ownership, or in a share in a cooperative housing corporation, but only for the period the debtor either lived in or received rent for the condominium or cooperative unit.
Who is not eligible for a Chapter 7 discharge?
- Those who have been granted a discharge in a Chapter 7 case filed within the last eight years;
- Those who have been granted a discharge in a Chapter 13 case filed within the last six years, unless payments under the plan in such case totaled 100% of the unsecured claims or 70% of such claims and the plan was proposed in good faith and was the debtor’s best effort;
- Those who file a waiver of discharge in their Chapter 7 case that is approved by the court;
- Those who conceal, transfer, or destroy their property with the intent to defraud their creditors or the trustee in the Chapter 7 case;
- Those who conceal, destroy, or falsify records of their financial condition or business transactions;
- Those who make false statements or claims in their Chapter 7 case, or who withhold recorded information from the trustee in the case;
- Those who fail to satisfactorily explain any loss or deficiency of their assets;
- Those who refuse to answer questions or obey orders of the bankruptcy court, either in their case or in the case of a relative, business associate, or corporation, or;
- The debtor is not an individual.
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