Chapter 7 Process
Filing for bankruptcy is not as easy as filling out a few pieces of paperwork and submitting them to the court. You will be required to complete an education course and pass a qualifications test, all before you can petition for Chapter 7 discharge.
Chapter 7 bankruptcy is a tedious process. You will have to submit a wide range of information about your finances and assets, which will not be easy. The court will close your case if you fail to provide the necessary information. If this happens, you will lose the benefit of automatic stay, and your debt collectors can resume their efforts.
Bankruptcy Attorney in Dallas County
Consulting with a bankruptcy attorney is the first, most crucial step of the process. Linda Littlefield is 100% devoted to bankruptcy law. For nearly 25 years she has been helping consumers and small businesses find relief from debt and debt collectors.
Call (972) 812-0900 to discuss how you can experience debt relief. We help clients through the Chapter 7 process in areas such as Dallas, Allen, Talty and Heath.
- Pre-Bankruptcy Credit Counseling
- What is a Means Test?
- I Passed the Means Test. Now What?
- What Happens Once My Case is Accepted?
- Additional Resources
Pre-Bankruptcy Credit Counseling
Back in 2005, the United States Government overhauled the nation’s bankruptcy laws. One of the changes was the addition of the Bankruptcy Abuse Prevention and Consumer Protection Act, which requires debtors to complete credit counseling six months before filing for Chapter 7.
You will not be able to file for bankruptcy without proof you received a credit counseling certificate. Obtaining the certificate is relatively easy. All you need to do is enroll in a 60 to 90-minute counseling session and pay a small fee. The session must be approved by the U.S. Trustee Program, but not to worry, there are hundreds of approved programs offered in Texas.
There are exceptions to mandatory credit counseling. However, these exceptions apply to very specific situations, including:
- You had to file for immediate bankruptcy to avoid immediate, substantial harm. This exception is only temporary, so you will still be required to complete the course within 30 days of filing.
- You are on active military duty, have a disability or are incapacitated.
- The U.S. Trustee Programs determines there are no courses available in your district. This exception is rare since most classes can be completed online, over the phone or in person.
What is the Means Test?
Pre-bankruptcy credit counseling is not the only hoop you will have to jump through before filing for Chapter 7. After completing pre-counseling, you will have to pass the means test, which determines who can file for Chapter 7 forgiveness.
This test will take into account various factors such as yearly income, expenses and family size to determine if you have enough disposable income to cover your debts. It’s worth noting this test only effects debtors with yearly income greater than the Texas median. Debtors with an income below the state median qualify for Chapter 7. Those whose income after exemptions is higher than the state median income will not be allowed to filed Chapter 7 and will have to file Chapter 13 instead if they wish for debt relief through bankruptcy.
Listed below are estimates of household incomes in Texas based on family size, according to the U.S. Department of Justice:
- 1 Person: $47,238
- 2 Persons: $63,148
- 3 Persons: $69,294
- 4 Persons: $78,572
- 5 Persons: $86,972
I Passed the Means Test. Now What?
Now that you’ve completed credit counseling and passed the means test, you can now file for Chapter 7 Bankruptcy. By this time, you should have retained a bankruptcy attorney. Initiating the process requires petitions and other legal forms, which can be 70 pages or more. These legal documents are complicated, and one small mistake can result in your petition being denied.
Some of the forms and paperwork you will be required to submit include:
- Voluntary Petition for Individuals Filing for Bankruptcy
- Summary of Your Assets and Liabilities and Certain Statistical Information
- The Property You Claim as Exempt
- Creditors Who Hold Claims Secured by Property
- Creditors Who Have Unsecured Claims
- Your Income
- Your Expenses
- Your Statement for Financial Affairs for Individuals Filing for Bankruptcy
- Statement of Intention for Individuals Filing for Chapter 7
A trustee will be assigned to your case once all the paperwork has been reviewed and submitted by your attorney. The role of a trustee is to review your paperwork, confiscate your non-exempt property and distribute it to creditors. You will not lose all your property during this process as certain exemptions apply. For instance, if your house is paid off, the homestead exemption would protect your home from being liquidated to pay creditors.
You will meet with your trustee and possibly creditors at a 341 meeting, also called a meeting of creditors. During this meeting, you will have to answer questions under oath about your finances and bankruptcy forms. Some of these questions may include how you came up with the value of big-ticket items, does anyone owe you money and have you transferred any property within the last year.
What Happens Once My Case is Accepted?
The trustee and creditors will decide if you are eligible for Chapter 7 discharge following the 341 meeting. This does not mean you will receive discharge immediately after the meeting. Creditors and the trustee have 60 days from the date of your meeting to object the discharge.
Once you’ve been granted discharge, the trustee will decide whether your non-exempt property is worth seizing, selling and distributing to creditors. Debt that is backed by collateral must also be given back to creditors. You can keep this property, but only If you pay the creditor for what it’s worth.
You must complete a debtor’s education course before your case can be closed. Like credit counseling, this course was added as part of the 2005 bankruptcy overhaul. A debtor’s education course covers personal finance management and provides ways to manage and make wise credit decisions following bankruptcy.
Your case will be closed three to six months after the court has been notified of the completed course. Once your case is closed, you will no longer be liable for most, if not all of your debt, and you can move on with your life.
Direct Counseling and Debtor Education Information – Visit the official website of the United States Department of Justice to learn more about the required bankruptcy counseling and education courses. You can find lists of approved providers by the state, answers to frequently asked questions and things to know before you file.
Chapter 7 Basics | United States Courts – Follow the link provided to learn more about Chapter 7 bankruptcy. You can gain a more in-depth understanding of how the process works, the role of a trustee and alternatives to the process. The information can be found on the official website of the United States Courts.
Chapter 7 Bankruptcy Lawyer in Dallas, TX
Do not file for Chapter 7 without the help of a bankruptcy attorney. Littlefield Law Firm understands you are already in a financial bind, which is why we provide affordable representation to our clients. We will guide you through the process and ensure all the necessary steps are taken so you can receive the relief you need.
Call (972) 812-0900 to schedule a time to speak with Littlefield Law Firm. We are based in Dallas County but also serve clients in communities throughout Collin County, Kaufman County and Rockwall County.