Filing For Chapter 7: What You Need To Know
Filing for bankruptcy is never an easy decision, but in some cases, it's simply unavoidable. If you have absolutely no way to pay your debts, then filing for bankruptcy could be the best solution available. Most debtors who declare bankruptcy will file under Chapter 7 of the United States Code. This article looks at some of the key considerations to take into account when filing under this provision of bankruptcy law.
Counseling
The law does not allow you to file for Chapter 7 bankruptcy without first having a counseling session with an approved credit counselor. The counselor will take an objective look at your finances and may suggest alternatives to bankruptcy if any are appropriate. There is a small fee for the session, although you can apply for a waiver if you are unable to pay. The session generally takes about one hour to 90 minutes. At the conclusion of the session, you need to get a certificate of completion to prove you have met the legal requirements for the pre-filing counseling.
Debts and Assets
Chapter 7 regulations require you to list all of your debts on your filing papers or bankruptcy forms. This includes both secured debt, which is debt secured by collateral, and unsecured debt. If you do not list a debtor on your paperwork, then, under the law, the unlisted debt cannot be discharged. If you do not list a creditor when you file and you have enough assets to pay at least some of your creditors, any unlisted creditor will not be paid. You will still owe the debt to the unlisted creditor.
In addition to listing your debts on your filing papers, you must also list your assets. These assets, with some important exemptions, will be sold by a representative of the court who will use the funds from the sales to partially pay back your creditors. If you don't list an asset, the court could potentially accuse you of fraud. Typical assets that must be listed include any real estate you own, including your house, all of your financial assets, and all vehicles and personal items.
Even if you believe that an asset is exempt under the law, go ahead and list it on your filing papers. You need to list any assets that you think are exempt from liquidation on a separate filing sheet called a schedule.
Fees
Two main types of fees are associated with filing for Chapter 7: the filing fee required by the court and the attorney's fee. The court fee is $320 and attorneys fees are typically $1,000 to $3,500 as of November 2022, according to the LawDistrict website.
For more information about filing for Chapter 7 bankruptcy, consult a bankruptcy attorney.
