A bankruptcy case is commenced by filing a request for relief with the United States Bankruptcy Court, along with information concerning your assets and liabilities.
The Court appoints an attorney – known as a trustee – to the case. A hearing is conducted by the trustee approximately thirty days after the case is filed at which time the trustee (and any creditors) may ask questions of the debtor under oath with respect to the information contained in the papers filed in the case. In the vast majority of cases, this is the only hearing that a debtor must attend in connection with the case.
The law allows the debtor to keep certain property – known as exempt property – to obtain their fresh start. In all cases, unless some party objects, the debtor retains the property claimed as exempt. Each case presents its own set of financial circumstances, but it is often possible to file a Chapter 7 bankruptcy and exempt those assets which are most important in day to day life, including household goods and furnishings, your home and your car. Most pension and/or retirement benefits also qualify as exempt property. In the event that there is property which is not exempt, it is the trustee’s job to liquidate those assets and distribute the proceeds to your creditors. The vast majority of Chapter 7 cases are known as “no asset” cases, and the debtor retains all of his or her property.
Approximately sixty days following the hearing, assuming that no objections to the case are filed, the Court will enter an order of discharge. Although bankruptcy will discharge most debts (such as credit cards, medical bills, personal loans, etc.), certain debts – such as State or Federal income taxes, student loans, alimony and/or child support – are not discharged as a result of the bankruptcy and must be paid.
The bankruptcy code can be very confusing, and everyone’s financial situation is different. If you have any questions concerning bankruptcy, or would like to discuss the options available to you under the law, we invite your inquiries.