617 East Main Street, Ste. 2

Anoka, Minnesota 55303

(763) 205-3058

steve@lodgelawoffice.com

 

 
 

It's Time to Take Control                                                                                                                     763-205-3058 

steve@lodgelawoffice.com                                                                                                                                              In historic downtown

Anoka, Minnesota

Chapter 7 Bankruptcy

Bankruptcy is a sterile, non-emotional debt-income balancing process, with very little stigma on the inside. Creditors are commonly “institutional”. They don’t feel vindicated if they collect money; they don’t feel wounded if the debt is discharged. Virtually all debtors, however, feel relieved when the discharge comes – not because the bankruptcy is over, but because worthless debt is no longer dragging them down, and they have started the rebuilding process.

Chapter 7 will discharge most of your debt, including credit cards, medical bills, unsecured loans, foreclosure deficits and so on. Are you better off settling debt or discharging it?  Generally debt discharged in bankruptcy does not result in taxable income (relief from debt can be taxable). Conversely, if you compromise and settle debt outside bankruptcy you may find that the relief from the debt results in "income" that increases your tax liability.  Depending upon the number of creditors and various other factors, negotiating debt resolution can involve as much or more attorney time than a bankruptcy itself, so the cost can be more. 

The "stay" will prohibit creditors and collectors from contacting you or proceeding with collection activities.

Chapter 7 is a liquidation. All unsecured, dischargeable debt will (hopefully) go away. All your secured debt will be discharged, but the collateral will be surrendered to the creditor. All non-exempt assets (those with any value) will be collected and liquidated. For most, there are no non-exempt assets, and usually no non-dischargeable debt. The process is clean and quick, and lawyers’ flat fees usually contemplate the typical, high speed-low drag case.


The Chapter 7 process follows this format:

1. Initial meeting. This is where we discuss the impact of bankruptcy, alternatives, the process, etc.

2. Client provides information. We need a lot of information, and a lot of documentation from you.

3. Attorney processes the information, applies legal analysis, completes Petition and Schedules for filing. Time depends on complexity.

4. Client undertakes “prepetition credit counseling” – required by statute. Simple and relatively quick, but costs $50 - $80 usually.

5. Attorney files Petition and other required documents, all via internet.

6. Court provides notice of filing and sets date for “341” Meeting of Creditors with the Chapter Trustee, usually set for 3 – 4 weeks after filing. The meeting is usually the only appearance required of the client. It usually takes 10 - 15 minutes, and consists of a series of "boilerplate" questions along with questions about any issues specific to your circumstance.

7. A post-petition financial management course and certification must be obtained and filed within 45 days of the Meeting of Creditors. Often clients take this course from the same company who provided their prepetition counseling certificate.

8. A notice of discharge arrives 60 days later, if no issues arose to stop it.

9. Reaffirmation agreements, (agreements to preserve a debt from discharge) if any, need to be filed within 45 days after Meeting of
Creditors.  Voluntary repayment after discharge is at your discretion, but a reaffirmed debt is binding.

10. Various deadlines for creditors, objections, etc., come and go, most of which are irrelevant unless a problem has arisen.

11. Secured creditors may bring motions to lift the stay so they can collect collateral.

12. Trustee may abandon non-exempt assets if they have no value to the estate.

13. Eventually a notice of case-closing will arrive.