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Understanding the Basics of Chapter 7 Bankruptcy Law

Posted on 21st Mar 2016

How Much Will it Cost and How Long Will it Take?

The two most common questions we get about Chapter 7 bankruptcy from clients and potential clients relate to cost and how long it will be until the bankruptcy is over. It takes four to six months to complete Chapter 7 from the day your bankruptcy petition is filed. In most cases, your Chapter 7 bankruptcy can be completed with one trip to the courthouse and a session with a trustee-approved credit counselor, and $335 in court fees in addition to attorney fees.   

Who Can File Chapter 7 Bankruptcy?

You will likely be able to file for Chapter 7 bankruptcy if you have not received a bankruptcy discharge in the last six to eight years. You might also be prohibited from filing Chapter 7 if the court determines you are able to complete a Chapter 13 repayment plan instead, based on your income, expenses and debt burden.

Chapter 7 Bankruptcy: The Filing of Many Forms

Although the time and cost requirements involved in Chapter 7 aren’t too burdensome, we cannot say the same about the forms that are required. You must file a petition, and a plethora of forms along with it, including ones which detail your monthly living expenses, your monthly income, your assets and your debts. If you are claiming that any of your property is exempt from the bankruptcy proceedings, you must complete more forms. New York law allows those who file Chapter 7 to keep some equity in their homes, as well as furniture, clothes and unspent Social Security payments. You may also claim as exempt any tools you may own that are necessary for your trade. It is helpful to have an experienced New York Chapter 7 bankruptcy attorney to help guide you through the form maze involved in the Chapter 7 process.

Chapter 7 and the Automatic Stay

An automatic stay takes effect as soon as your Chapter 7 bankruptcy is filed with the court. The stay prevents creditors from continuing to harass you for money, and it also prevents them from doing things like putting liens on your bank account, garnishing your wages or cutting off your utility services. As you can imagine, this is an immense relief when you are incredibly stressed out over finances.

The Role of the Bankruptcy Trustee

The court oversees and controls bankruptcy filings through the trustee appointed to your case. The primary job of a bankruptcy trustee is to ensure that your creditors are paid as much of what they are owed as possible. The trustee’s pay increases if he or she recovers more assets for the creditors, and he will look at all your forms and filings to ensure that you are in compliance with the rules. He will look to see if you have any nonexempt property which can be sold to raise money to pay your debts. The trustee takes special care reviewing financial transactions which took place in the 90 days prior to your Chapter 7 filing. He can undo this transactions in some cases to free up additional assets to pay off your creditors. Many Chapter 7 bankruptcy cases do not have these issues, as there is nothing of value to sell.