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CHAPTER 7 – “STRAIGHT” BANKRUPTCY
In a Chapter 7 bankruptcy, most of your debts are completely erased. There are some notable exceptions to this, such as debts for government taxes, criminal fines or penalties, and most student-loans, but, otherwise, a Chapter 7 discharge is the complete liquidation of all of your debts. While it is possible to retain secured property (property that serves as collateral for a loan), such as a home or automobile, in a Chapter 7, there can be complications in attempting to do so. Chapter 7 bankruptcy is an ideal solution for debtors whose debts are primarily unsecured consumer debt or who have real property that they do not wish to retain.
A Chapter 7 bankruptcy, in general, takes about 4 months from the filing of the petition to the receipt of the discharge. That time-frame does not take into consideration the amount of time required for the collection of your information and documentation up front, which can take anywhere from a handful of days to a few weeks, depending upon how quickly we can work together to collect and assemble the information required to create your petition.
You can expect to pay $299 for court filing fees and up to $50 each for two required “credit counseling” courses required by the court in addition to my own attorney fee. For Chapter 7 bankruptcies, I charge a flat fee tailored to the level of complication involved in your individual case. (For more information on my fees, visit my Rates page.)
Some of the information you will need in order file a Chapter 7 bankruptcy petition in the Eastern District of Michigan, where I practice, includes:
- Your past 2 years’ tax returns
- Pay-stubs, pay advices, or income records covering the six months prior to the month in which you intend to file your petition
- Bank statements for the past 6 months
- Titles to any vehicles
- The copies of your mortgage filed with your county records office
- Records of any and all debts owed to you or owed by you
- Most recent valuation of your home or any real property you own
- Copies of any leases or contracts to which you are a party
- Your latest credit-report
- … and more
The creation of even a Chapter 7 bankruptcy petition is an involved process that will require, particularly at first, good communication between us. However, the benefits are immediate: as soon as the bankruptcy petition is filed, an automatic stay by the bankruptcy court goes into effect against all of your creditors. This stay will prevent your creditors from calling you, mailing you, garnishing your wages or Michigan state tax return, repossessing your vehicles or other property, or initiating foreclosures against your home.
The bankruptcy process after the petition is filed mainly involves a lot of waiting.
An administrative meeting with a court-appointed trustee is scheduled 20-60 days after the petition is filed. This meeting, known as a “341 Meeting of Creditors,” after the section of the Bankruptcy Code which requires it, is an opportunity for creditors to appear to enter an appearance on the record and ask questions. The trustee, whose job is to liquidate any of your property that is not exempt from the “bankruptcy estate” that is created when you file your petition for the benefit of the creditors whose debts are discharged by the bankruptcy, will also ask questions. In most cases, these meetings last only 5-10 minutes, and creditors only occasionally appear. 60 days after this 341 Meeting, if all has gone well and the creditors and trustee have not filed any successful motions to interfere with your bankruptcy, your discharge will be granted.
Filing a Chapter 7 petition will bring immediate peace of mind, and, when the entire process is complete, a chance to make a fresh start with your finances—and your life.