CHAPTER 7 LIQUIDATION (COURT FILING FEE $299.00)
A Chapter 7 is the most common type of bankruptcy filed. It is commonly referred to as a liquidation bankruptcy or a straight bankruptcy. The entire process usually takes between three (3) to four (4) months.
THE FILING OF A PETITION:
A Chapter 7 is commenced by the filing of a petition with the Court. Once a petition is filed all of the debtor's property is transferred to an estate, similar to a probate estate. The United States Trustee's Office will then appoint a Trustee to oversee the estate. A Trustee is usually a local attorney. The Trustee is charged with getting as much money for creditors as possible by selling property of the estate. Some property does not get transferred to the estate. This property is laid out within various statutues, including the Bankruptcy Code. The debtor may also exempt property from the estate. New York now allows long term residents to choose between Federal exemptions or New York State specific exemptions. Because of exemptions and property that is not considered to be a part of an estate in the first place a majority of Chapter 7 cases are no asset cases, meaning that a Trustee does not sell anything. If a Trustee wishes to sell property he/she must get the permission of the Bankruptcy Judge and allow the debtor to present a case to the judge as to why the property should not be sold.
THE 341 MEETING (MEETING OF CREDITORS)
In between twenty (20) and forty (40) days after a petition is filed a 341 meeting must take place. This meeting is also known as a meeting of creditors. The Trustee who is appointed in the case will conduct the meeting. The Bankruptcy Judge will not be present. This meeting is designed to hatch out any issues that a case may have. The person who files a petition must attend this meeting. They will be asked to provide proof of identity (drivers license) and proof of their Social Security Number (Social Security Card). The Trustee should have received from the debtor a copy of a variety of financial documents prior to the meeting, such as tax returns, bank statements, deeds, titles, etc.... The average 341 meeting lasts approximately 5 minutes. Common questions are:
Did you list all of your property in your bankrutpcy?
Did you pay any creditor within the 90 days prior to filing your case?
Did you transfer any real estate within the six(6) years prior to filing?
Once the Trustee has asked all of his/her questions they will close the meeting. Any creditor may object to the bankruptcy going forward (obtaining a discharge) within sixty (60) days of the meeting.
THE DISCHARGE ORDER
The reason to file a Chapter 7 is to ultimately get a discharge. A discharge is a Bankruptcy Court order telling your creditors that you are forgiven from your debt. Some debts are exempt from discharge. The most common types of debts that are not covered by a discharge are personal income taxes that are less than 3 years old, student loans, criminal restitution orders, or child support obligations. In some instances student loans may be discharged, however, it is very difficult to make a case that they should be. If a creditor violates the discharge order and continues to collect a debt the creditor can be held in contempt of Court and fined heavily.