FAQs

A Chapter 7 bankruptcy is a liquidation proceeding of non-exempt property overseen by a trustee to pay off debt. The proceeds from the liquidation are converted to cash and are distributed to creditors. The debtor receives a discharge of all dischargeable debts, often referred to as a “fresh start.” One of the purposes of this type of bankruptcy is to wipe out debts of those who are hopelessly in debt.

No bankruptcy case itself is the same, but the underlying theme for each bankruptcy filing typically involves an individual or business who cannot pay their bills.  For individuals, this could be due to a recent job loss, and unexpected medical illness and resulting medical bills, the downturn in the economy and housing market, etc.  Individuals also face time-sensitive problems such as foreclosure, repossession, garnishments and lawsuits.  For businesses, whether it be due to a problematic and volatile economy or simply a change in market demographics, businesses encounter either an inability to pay bills as they come due or an inability to generate cash or capital to sustain dips in performance and revenue.

Once a bankruptcy petition is filed, an automatic stay goes into effect and creditors listed in the petition must cease all actions against you – lawsuits, garnishment of wages, debt collection phone calls, repossession of property, foreclosure on real estate property and other payment demands. Unless the creditor succeeds in having the stay lifted, the automatic stay remains in effect throughout the duration of the bankruptcy.  Some actions that are not stayed include criminal actions, domestic proceedings and certain actions taken by governments.  

Generally, debts discharged include medical bills, loans, credit card debt, cash advances, and other judgments. For your own protection against losing valuable assets, it is important to seek legal advice to ensure you know which debts are dischargeable and which are not.

Typically, alimony, child support, student loans, taxes, criminal fines (including debts related to DUI), debts not listed in the bankruptcy petition and certain other debts may not be discharged. Your attorney can better advise you regarding which debts will not be discharged based on your individual situation and certain exemptions under your state’s law.

You must provide a wide variety of information regarding your financial status:

• Ownership interest in houses, investment properties and cars, including copies of deeds and car title, if available.
• Wage information, such as 6 months of paystubs and recent W-2s.
• Disclosure of all non-wage income.
• Pension, IRA, 401(k) and other retirement account info, including stock holdings.
• Personal property, such as handguns, furs, electronics, etc.
• Household good and furnishings.
• Clothing and jewelry.
• Bank account statements
• Ownership interest in any businesses, including applicable operating agreements.
• Lawsuit information, including those filed by you and those filed against you.
• Names, addresses and account information of all creditors you owe money to.
• Life insurance policies, particularly those with cash value.
• Disclosure of all payments made to creditors within the previous 90 days.
• Tax liabilities.
• Domestic support obligations, such as alimony or child support, including contact information for the recipients.
• Lease and other unexpired contract information, such as apartment or auto leases.

If you do not own a lot of assets, Chapter 7 can wipe out your debt without a lot of loss. There is no minimum debt required to file for Chapter 7 bankruptcy. Creditors will no longer have a claim on you. Once your debt is discharged, your possessions obtained after discharge and your wages are clear of any claim. The Chapter 7 process is fast, and your debts are discharged quickly, in as little as four to six months.

At Toronjo and Prosser Law, we will take the time to discuss whether bankruptcy would resolve your financial situation. We will answer any question or concerns that you may have about this legal process.