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Chapter 7 bankruptcy is the most popular form of bankruptcy because it allows the debtor to wipe out their debts. Chapter 7 is generally used by debtors who do not have enough income to pay their debts after paying for their basic living expenses. Chapter 7 is available to individuals, couples, corporations and partnerships.

Upon filing of the Petition for Bankruptcy, the court imposes an “automatic stay”. The automatic stay is a court order prohibiting creditors from taking any adverse action against the debtor. For example, if creditors are suing you in court, that lawsuit is frozen and cannot continue until the creditors go to the bankruptcy court and obtain relief from the automatic stay.

Obtaining relief from an automatic stay is not guaranteed and may take a couple of months for a creditor to obtain. Therefore, if you are facing immediate adverse action from creditors, filing for bankruptcy may provide you immediate protection. Filing for bankruptcy also prevents creditors from calling you demanding payment. Once the petition for bankruptcy is filed, all communications from creditors must be directed to the trustee.

When the petition for bankruptcy under Chapter 7 is filed, the bankruptcy court will appoint a trustee to your case and create a bankruptcy estate. The trustee is generally a local attorney who oversees the discharge of debts and the distribution of any assets.

Once the petition for bankruptcy is filed, the court sets a date for the Meeting of Creditors. This is a meeting with the debtor and his attorney, the trustee, and any creditors who wish to attend. During the Meeting of Creditors, the trustee will ask the debtor questions as to whether the papers filed accurately detail all of the income, assets and debts. Then the creditors have an opportunity to briefly question the debtor to determine whether the debtor has any money to pay the debts.

After the Meeting of Creditors, if all the lists of income, assets and debts are accurate and go unchallenged by creditors, the trustee will recommend a discharge of the debts. Discharge means that the debts are wiped out.

A non-dischargeable debt is an obligation which the debtor will continue to be responsible for even after the bankruptcy is over. There are certain debts that are not dischargeable, for example:
-Alimony and child support
-Taxes, penalties and interest under 3 years old
-Student loans and loans from 401ks
-Recently made luxury purchases.
Before considering Chapter 7 bankruptcy you should take an inventory of the types of debt owed. If most of your debt is non-dischargeable, then filing for Chapter 7 bankruptcy will not be helpful.

If you are considering filing for bankruptcy, a Chapter 7 bankruptcy will be appropriate if:
1. You have not filed bankruptcy in the last two (2) years;
2. Your dischargeable debts outweigh your income and assets such that you will likely never be able to fully repay your debts;
3. Your income is not likely to increase substantially in the next five (5) years;
4. There is court action, foreclosure proceedings, or other collections efforts are threatened by your creditors.
If you are considering filing for bankruptcy, but a Chapter 7 bankruptcy is not appropriate, you may file a Chapter 11 or Chapter 13 bankruptcy instead.

If you are considering filing for bankruptcy, call John Peter Lee, Ltd., at (702) 382-4044 and make an appointment to meet with our bankruptcy attorney, Yvette R. Freedman. If you are meeting with Ms. Freedman, please gather your credit card statements, tax returns, and other documents relating to your income, assets and debts.