Chapter 7 Bankruptcy Guide

8/7/2019 Chapter 7 Bankruptcy Guide

1/21

10615 JUDICIAL DRIVE SUITE 101 FAIRFAX, VA 22030877-891-4520

[email protected]


2/21

Chapter 7 Bankruptcy Page 1

Vienna Law Group, P.C. 877-891-4520

Disclaimer and legal notice

This book is copyright 2010 Vienna Law Group. You may freely distribute

this book through email, your website, or other means, as long as it

remains intact. In fact, we believe the information in this book is so

important, we ask you to share it with those you feel may benefit from it.

Although this book provides a wealth of information about dealing with

lawsuits, debt collection and bankruptcy, it is intended to provide education

only. No portion of this book constitutes legal advice. Reading this book

does not establish client-attorney relationship. To receive legal advice, you

must hire an attorney.

Vienna Law Group

10615 Judicial Drive Suite 101Fairfax, VA 22030

877-891-4520

[email protected]
http://www.viennalawgroup.com/http://www.viennalawgroup.com/


3/21



About this book

Unpaid debt has reached epic proportions in the United States. Where

personal debts for some used to add up to tens of thousands of dollars,

some people are now dealing with over a hundred thousand dollars in

personal debt with no relief in sight.

Such crushing debt leads to far more than an inability to pay the bills. The

stress of such overwhelming debt can lead to health issues, difficulties at

work and at home. It can even lead to an onset of depression.

In 2009 there were over 800,000 chapter 7 bankruptcy filings in the United

States.

To deal with the stressful burdens of out-of-control debt, many Americans

face the need to gain a fresh start. Job loss, medical issues divorce and

business failure stand at the top of the list of the many reasons

experienced which lead to insurmountable debt. For these people

bankruptcy may be the best solution.

This guide is intended to help you understand chapter 7 bankruptcy,

whether or not its the right option for you and what to do if you decide tofile. Youll also learn what your options are when it comes to protecting

yourself from people attempting to collect on debts.

This guide condenses volumes of information on these subjects into

something thats easy to understand for every reader. Every attempt has

been made to provide you with the most accurate information about the US

and Virginia legal system as they relate to the common issues of lawsuits,

debt collection and bankruptcy.

This guide is not, and cannot be, an exhaustive guide to every nuance of

the legal system, civil procedure and every possible eventuality you might

experience when being sued or when trying to sue someone. For that level

of guidance, you should hire an attorney. However, after reading this guide,


4/21



you should find that guidance more productive and useful than if you didnt

have a basic understanding of the processes involved.

Information isnt advice so use this guide to gain a better understanding of

how bankruptcy might help you in your situation and then seek out advicefrom a qualified attorney who can help.

Read on and if you feel that youre ready to pursue filing chapter 7

bankruptcy protection, call us to set up a free consultation with one of our

bankruptcy specialists.

Vienna Law Group, P.C.

10615 Judicial Drive Suite 101

Fairfax, VA 22030877-891-4520

[email protected]


5/21



What is chapter 7 bankruptcy?

The US Constitution gives power to the federal government to establish

uniform bankruptcy protection laws which apply equally to people in all

states. These laws have changed over the years but they still exist as a

powerful tool to help people gain protection when overwhelmed with debt.There are several forms of bankruptcy and are identified by the chapters in

which they appear in the bankruptcy code.

Chapter 7also known as liquidation bankruptcyallows you to clear many

of your debts. Since new laws were passed in 2005, qualification for

chapter 7 bankruptcy has become more difficult. The filing process is also

more complex that previously, making legal help almost indispensible for

anyone seeking bankruptcy protection.

Fees for legal representation have increased with many attorneys and law

firms specializing in bankruptcy cases. Some of your property may be sold

to help pay the debt during the process of a chapter 7 bankruptcy filing.

The types of debt discharged with chapter 7 bankruptcy protection include

the most common forms of personal debt.

Credit card

medical bills

unsecured loans

secured loans

contracts

leases

Debts not covered by bankruptcy protection include

back child support

and alimony loans to a pension plan

student loans and

recent back taxes

Debts relating to personal injuries and criminal judgments are also not

covered in bankruptcy protection.


6/21



At the end of the bankruptcy process most, and sometimes all, of your debt

will be canceled.

What other types of bankruptcy are there?

In addition to chapter 7, there are other types of bankruptcies which deal

with different types of situations. In case youre wondering, the chapter of

the bankruptcy refers to the chapter in the bankruptcy code where the laws

are defined.

Heres a quick overview of the other types of bankruptcies.

Chapter 13 bankruptcy

This is also known as a reorganization bankruptcy. When filing for chapter

13 bankruptcy, you submit a five year plan to the trustee to pay off all, or aportion of, your debts. During the payback period, youre protected from

collection attempts, wage garnishing, frozen accounts and other attempts

to collect on the debts. At the end of the successful completion of the plan,

any remaining debts are cleared.

Chapter 13 bankruptcy is the second most common form of bankruptcy

protection. If you do not qualify for chapter 7 bankruptcyusually due to

failing the means testchapter 13 is your next best option for bankruptcy

protection.


7/21



Chapters 9, 11, 12 and 15 bankruptcy

Chapters 9, 11, 12 and 15 bankruptcy are less common as they deal with

more specific groups of people.

Chapter 11 Bankruptcy - Business / Corporate Bankruptcy.

Chapter 11 is the type of bankruptcy mentioned in the news most often.

Chapter 11 bankruptcies are high-profile bankruptcies used mainly by

corporations, limited liability companies and partnerships to reorganize their

financial affairs. Individuals may file for bankruptcy under Chapter 11 but it

is rare. Chapter 11 bankruptcy is a time consuming and expensive chapter,

therefore it is only appropriate for individuals whose circumstances make

Chapter 7 or Chapter 13 inapplicable or inappropriate. Less than one

percent of all bankruptcy filings are Chapter 11s.

Chapter 9 Bankruptcy - Municipal Entities And Railroad Companies.

Chapter 9 bankruptcy is the chapter that railroad companies and municipal

entities - cities, counties, school districts, and gas and highway authorities -

use when they file bankruptcy. Individuals cannot use Chapter 9.

Chapter 12 Bankruptcy - Family Farming Operations.

Chapter 12 is used by family farmers. An individual that does not ownagricultural property cannot use Chapter 12.

Chapter 15 Bankruptcy - Foreign Debtors.

Chapter 15 is the chapter used by United States courts to administer

assets of companies who have filed for bankruptcy protection in foreign

jurisdictions.


8/21



The chapter 7 bankruptcy means test

One of the most significant developments in the new bankruptcy laws is the

means test. To qualify for chapter 7, your incomeaveraged over the

past six monthsmust fall below that of the median income for your state.

If you are even a dollar over this amount you will not qualify for chapter 7

bankruptcy protection and instead will be required to file for chapter 13

protection.

During the meeting of the creditors, the trustee will most likely spend the

most time and attention on looking over your financials to ensure that you

qualify for the means test.

The following table shows the media income levels for the State of Virginia.

Household SizeSingle $48,3622 Person $65,1223 Person $74,1514 Person $85,939


9/21



What if you dont qualify for chapter 7 bankruptcy?

The primary reason for not qualifying for chapter 7 is due to the means test.

The method for calculating your average income can seem a bit odd and

unfair given your circumstances.

For example, if you made $5,000 a month for three months, lost your job

and filed bankruptcy three months later, your income would average to

$2,500 a month even though your current reality is no income at all.

In other situations, you may still hold a job, and your income simply

exceeds the threshold for chapter 7 qualification. In this case, you can

convert your filing to a chapter 13 bankruptcy.


10/21



How does bankruptcy protect me from creditors?

Bankruptcy is intended to help people burdened with debt to obtain a fresh

start. When you file bankruptcy, the courts immediately issue something

called an Automatic stay. With this court-ordered protection, you get a

break from the phone calls, the letters, law suits and attempts to repossessproperty and freeze accounts.

Whats an automatic stay?

The automatic stay is a very powerful feature of the bankruptcy process. It

stops collections attempts cold. This court order automatically goes into

effect as soon as you file and prevents them from making any attempts to

collect during your case.

Once bankruptcy is filed, all collections attempts must be directed through

the courts and collections agents are barred from contacting you directly.

Of course, not all creditors will automatically hear about your filing when it

happens so it is possible that you will still receive a call or two after filing,

but once you inform them of your bankruptcy case information they should

not make any further attempts to contact you.

While an automatic stay does protect you from lawsuits and collections

processes associated with your debts, it doesnt ensure that all elements ofthe status quo remain the same. For example, if your utilities can still be

shut off if you fail to pay even though the collections attempts by the utilities

companies are prevented by the bankruptcy filing.


11/21



What happens to your property, house and belongings during, and after,

bankruptcy?

When you file chapter 7 bankruptcy, almost everything you own is subject

to the authority of the bankruptcy court. Your property is known as your

bankruptcy estate and may be sold by the trustee of the court to pay offsome of your debts.

Clothing

Books

Computers

Phones

Stereo/TV

Real estate

Boat

Artwork

Stock

Furniture

Clothing

Sporting goods

The trustee receives a commission on property sold so he or she willobviously be very interested in the accuracy and completeness of your

estate disclosure.


12/21



Exempted property

Some property may be exempted from salein order words, you get to

keep it. This is managed through a series of exemptions allowed by the

state. Figuring out what is exempt can be a challenge and is something that

an attorney can help you with.

Heres a summary of some of the exemptions you may be able to claim in

order to keep some of your property during bankruptcy.

Equity in your home (must file a homestead declaration before filing

for bankruptcy)

$5,000 plus $500 per dependant

Life insurance proceeds

Pensions Personal Property

o Bible

o Burial Plot

o Clothing up to $1,000

o Family keepsakes up to $5,000 total

o Household furnishings up to $5,000 total

o Motor vehicle up to $2,000

o

Petso Wedding and engagement rings

Trade tools

Uniforms, arms and equipment for the military

There is also a wildcard exemption which allows you to declare expect

property which may not be directly covered by the other personal property

exemption categories.


13/21



Protecting yourself from debt collectors

Creditors and collection agencies may not discover the bankruptcy filing as

soon as it is filed. Once the creditor is informed of the bankruptcy filing and

provided with the basic information about the case, it must take no further

action.

If youre contacted by a creditor, after you have filed forbankruptcy, provide

them with the following information:

The chapter filed

The date filed

The district where filed

The case number

Your bankruptcy attorney

In rare circumstances, a creditor may receive bankruptcy court authority to

proceed with its collection efforts. If such a court order is obtained, you will

be informed of it by the courts.

Creditors holding nondischargeable obligations, such as taxing entities,

student loan lenders and guarantors, and ex-spouses entitled to past or

future child support or alimony, must also cease their collection efforts

against assets of the bankruptcy estate, at least until the date of discharge,which in most Chapter 7 bankruptcy cases is approximately four months

after the bankruptcy petition is filed.

If creditors continue to call after the filing of the petition, inform your

attorney.

Off limit debt collection tactics

Laws have been established to limit the practices and tactics of debt

collectors, but it is still easy to find news reports of abusive debt collection

practices. Indictments are still being regularly issued against collections

agencies for flouting these laws. Recordings of voice mail messages have

been handed over to the press and to the courts of debt collectors

threatening violence, using profanity and even making false threats of

incarceration over debt.


14/21



You have rights.

If you are experiencing any of these abusiveand illegal tacticsfrom any

collection agency, you should report it immediately.

According to the FTC, the following tactics are off limits for debt collectors.

Harassment: Debt collectors may not harass, oppress, or abuse you or

any third parties they contact. For example, they may not:

use threats of violence or harm;

publish a list of names of people who refuse to pay their debts (but

they can give this information to the credit reporting companies);

use obscene or profane language; or

repeatedly use the phone to annoy someone.

False statements: Debt collectors may not lie when they are trying to

collect a debt. For example, they may not:

falsely claim that they are attorneys or government representatives;

falsely claim that you have committed a crime;

falsely represent that they operate or work for a credit reporting

company;

misrepresent the amount you owe;

indicate that papers they send you are legal forms if they arent; or

indicate that papers they send to you arent legal forms if they are.

Debt collectors also are prohibited from saying that:

you will be arrested if you dont pay your debt;

theyll seize, garnish, attach, or sell your property or wages unless

they are permitted by law to take the action and intend to do so; or

legal action will be taken against you, if doing so would be illegal or ifthey dont intend to take the action.

Debt collectors may not:

give false credit information about you to anyone, including a credit

reporting company;


15/21



send you anything that looks like an official document from a court or

government agency if it isnt; or

use a false company name.

Unfair practices: Debt collectors may not engage in unfair practices whenthey try to collect a debt. For example, they may not:

try to collect any interest, fee, or other charge on top of the amount

you owe unless the contract that created your debt or your state law

allows the charge;

deposit a post-dated check early;

take or threaten to take your property unless it can be done legally; or

contact you by postcard.

If you feel that a debt collector is harassing you or breaking a law with one

of the tactics mentioned above, report the matter to the FTC or to the local

state Attorney General.

Keep a log of the time and date for every call received and the name

reported by the collection agent. The names you are given from collections

agents are often not their real name. However, such information may be

used for an investigation to find the person(s) responsible.


16/21



What is the filing process for chapter 7 bankruptcy?

Mandatory credit counseling education

Before you can file for chapter 7 bankruptcy, you must receive creditcounseling education. In the state of Virginia, you must receive the

certificate of completion for this education a full 24 hours before filing.

The fee for your certificate is usually around $25.

We recommend Abacus Credit Counseling for your mandatory credit

counseling education. We are not affiliated with them in any way.

You can find them online at www.abacuscc.org and take your class online.

When you complete the programwhich shouldnt take more than a couple

of hoursyou will be able to request the completion certificate and have a

copy sent to your email address.

File paperwork

This is probably the most excruciating part of the process. Collect

information on the debts you owe, your income and expenses, your estate

and your most recent tax returns.

The filing fee for chapter 7 bankruptcy is $299. It is possible to pay this fee

installments (form 3a) or have it waived (form 3b) with the courts by filing

the appropriate request. In either case you will then be required to appear

before the bankruptcy judge to justify your request.

Meeting of the creditors

Also known as the 341 Meeting, this is a meeting with the trustee to go

over your filing. At this meeting, the trustee is looking for accuracy and fulldisclosure. It is also possible for your creditors to appear at this meeting,

though its rare that they will be there.

Because of the new laws passed in 2005, the assumption is that youre

committing fraud and the meeting is for you to prove youre not. This is

unfortunate because studies have shown that the incidence of fraud in
http://www.viennalawgroup.com/http://www.abacuscc.org/http://www.abacuscc.org/http://www.viennalawgroup.com/


17/21



bankruptcy is very rare. However, because of this be sure to candidly

provide your bankruptcy with any information requested to ensure that your

bankruptcy wont be denied on the grounds of failing to disclose material

information.

Discharge debt

At the end of the bankruptcy process, your debts will be cleared. Creditors

are barred from attempting to collect on discharged debts or to report the

debts to the credit agencies.


18/21



Questions asked during the creditors meeting

Heres a list of some of the questions the trustee may ask during the

creditors meeting. Go through this list and be prepared to answer all of

them.

Your name and current address

Your picture ID and social security card

Have you read the information sheet provided by the trustee?

Did you read and sign all of the documents you filed with the court?

Are you personally familiar with the information in the filing?

Is all of the information in your filing true and correct?

Are there any errors which should be brought to the courts attention?

Are all of your assets listed?

Are all of your creditors listed?

Have you previously filed bankruptcy?

Do you own any property?

Have you given away any property in the past year?

Does anyone hold any property belonging to you?

Does anyone owe you money?

Have you made any large paymentsover $600to anyone in the

past year?

Do you own a vehicle? Do you own any cash value life insurance policies?

Do you anticipate acquiring any property, cash or assets?


19/21



Should I use a lawyer for filing chapter 7 bankruptcy?

Since the passage of new bankruptcy laws in 2005, the process for filing

bankruptcyand especially the navigation of the required formshas

become very complex. For this reason alone, you should consider hiring an

experienced attorney to help you with your case.

To quote Albin Renauer, co-author of How to File for Chapter 7 Bankruptcy,

The "Bankruptcy Reform and Consumer Protection Act of 2005"

(BAPCPA) is a bad law. Some lawyers and law professors have taken to

calling it the "Bankruptcy Abuse Reform Fiasco" (BARF). It's based on false

assumptions about why people get into financial trouble and imposes

additional rules and paperwork on people already overwhelmed by bad luck

and unpayable debt.

If you want to go it alone, the forms are available on the web. The state of

Virginia has placed them online as PDF files which can be filled out through

your computer. You can find the entire list of forms here

http://www.vaeb.uscourts.gov/scripts/formsqry.exe

We recommend a qualified attorney to help you with your case, and not just

because we earn a fee by providing the service. The issues leading to

bankruptcy are very stressful for anyone. With the complexity of the new

laws its simply too easy to get lost in the emotion and make a mistake.

Thats what legal representation is for.

Let us help you. Contact us and schedule a meeting with one of our

bankruptcy specialists. Well look at your case and make the

recommendation that we feel is in your best interests.

Vienna Law Group

10615 Judicial Drive Suite 101

Fairfax, VA 22030877-891-4520

[email protected]
http://www.viennalawgroup.com/http://www.vaeb.uscourts.gov/scripts/formsqry.exehttp://www.vaeb.uscourts.gov/scripts/formsqry.exehttp://www.viennalawgroup.com/


20/21



About The Author

Jad Sarsour, Esq. has experience in a wide

variety of fields and he is passionate about

sharing his knowledge with others both ininteractions with clients and through writing books

available to the general public on diverse legal

topics of concern to common citizens. He used to

work in the commodity industry, handling financial instruments such as

Medium Term Notes (MTNS), Bank Guarantees (BG), and Treasury Notes.

He has used his legal expertise to successfully navigate and close

business transactions in the sugar, oil, and natural gas industries. His

knowledge of international issues in business law proved invaluable inhelping several American companies to set up operations in the Middle

East. In addition to working with established companies, Jad has advised

budding entrepreneurs, helping one client raise 350 million dollars in start-

up capital for a new venture. Jad has also worked on many Chapter 7 and

13 bankruptcy cases.

EDUCATION

George Mason University

Georgetown University- 2000

Michigan State College of Law East Lansing J.D.

BAR ADMISSIONS

Virginia State Bar

Virginia Supreme Court

4th Circuit Court of Appeals

U.S. District Court, Eastern District of Virginia

U.S. District Court, Western District of Virginia U.S. Bankruptcy Court, Western District of Virginia

U.S. Bankruptcy Court, Eastern District of Virginia


21/21


Vi L G P C

Documents

Chapter 7 Bankruptcy Guide