The Chapter 7 Process

The Chapter 7 process is relatively straightforward for must debtors.  Unlike Chapter 13 which can involve several hearings and requires a payment plan lasting 3-5 years, the Chapter 7 bankruptcy process typically is over 90-120 days after filing.  Chapter 7 bankruptcy does not require any repayment plan in order to obtain a discharge of debt and is therefore the most preferred chapter of bankruptcy by clients. 

Significant changes were implemented as a result of the passage of BAPCPA (Bankruptcy Abuse Prevention and Consumer Protection Act) which limits the availability of Chapter 7 bankruptcy to many potential debtors.  The infamous Means Test was a result of BAPCPA and requires that the gross household income of the debtor be the same or less than the median income for a family of the same size in the applicable state.  As of September 6, 2010 the following figures reflected the median incomes permitted in Florida.

FAMILY SIZE
STATE	1 EARNER	2 PEOPLE	3 PEOPLE	4 PEOPLE

  FLORIDA                $41,079.00                   $52,073.00                $58,366.00                $68,763.00

**For cases filed on or after April 1, 2010, add $7,500 for each individual in excess of 4.

Please be consult a bankruptcy attorney regarding the amounts permitted under the Means Test and qualifications to file Chapter 7 bankruptcy.  The numbers reflected above are only one step in the process.  Individuals can still qualify for Chapter 7 if the household income exceeds these amounts but requires a complex set of calculations and application of permitted deductions.  If married the income of the spouse will be considered in the Means Test even if the other spouse is not filing.  However, the bankruptcy will have no legal effect on the non-filing spouse past the consideration of the income in determining which chapter of bankruptcy can be filed.  Despite the passage of BAPCPA, Chapter 7 bankruptcy remains a viable option for many individuals and bankruptcy rates have risen to levels not seen since the passage of BAPCPA in 2005. 

Once it has been determined that an individual or married couples qualifies for chapter 7 bankruptcy, the process is most administrative but attention to detail and experience is critical to a successful bankruptcy.  Notwithstanding that bankruptcy forms are made available by the United States Bankruptcy Courts, it is often not advisable to file these documents without the assistance of an experienced bankruptcy attorney as there are many areas that can cause problems for the debtor.

One of the most critical components of the bankruptcy petition, schedules and accompanying documents is the schedule of Exempt Property.  While many clients can complete much of the routine informational questions, to properly claim exemptions under Florida law one must be familiar with the exemption statutes and case law governing the application of the exemptions.  Failure to properly exempt assets can result in the loss of that asset including homes, cars, investments, funds held in bank accounts and other items of both real and personal property.  The most important guidance a bankruptcy attorney can provide is in the area of property exemptions.  The ability to keep assets and obtain a fresh start is in large part dependent on properly exempting assets and not doing so correctly can result in a challenge by the Trustee.

The most burdensome aspect of a Chapter 7 is the production of financial information and other supporting documentation needed by both the bankruptcy attorney and the Court to properly file a bankruptcy case.  Clients are often surprised by the amount of information that is needed and the level of detail required by the Court.  It is essential to comply with these requests because failure to do so will result in the inability to file your case or the Trustee moving to object or dismiss the case for failure to comply.  Once the documents are provided, however, the bankruptcy attorney can typically draft the required documents in a short period of time.  The basic documents drafted consist of the petition, schedules of real and personal property, exempt property, and a detailed accounting of the income and expenses of the debtor.

Prior to filing the chapter 7 bankruptcy, the clients are required to take a pre-filing debt counseling course which can be taken online or by phone with many providers and is relatively inexpensive.  Once the case is filed a Meeting of the Creditors (341 meeting) will be scheduled between 30-40 days from the date of filing.  Creditors are permitted to attend and ask questions but rarely do.  The client is required to attend and answer questions from the Trustee.  This meeting, however, typically only lasts 5 minutes and the questions are routine.  Most clients never attend court or go before the bankruptcy judge.  Chapter 7 is predominantly administrative and unless there are issues Court attendance is rare.

At the conclusion of the case the chapter 7 debtor should received a discharge.