Chapter 7 Bankruptcy

Section 722 of the Bankruptcy Code governs Redemption in a Chapter 7 Bankruptcy. Redemption permits the Debtor in a Chapter 7 Bankruptcy to pay a Secured Creditor the value of its Secured Claim, in full satisfaction of the Debt. The remaining Unsecured Claim is Discharged through the Chapter 7 Bankruptcy. In order to Redeem Property in a Chapter 7 Bankruptcy, the Property must be:

Primarily for Personal, Family or Household use;

From a Lien Securing a Non Dischargeable Household Debt;

Exempted under Section 522 of the Bankruptcy Code OR Abandoned under Section 444 of the Bankruptcy Code

Section 707 of the Bankruptcy Code governs Dismissal of a Chapter 7 Bankruptcy. Various factors can lead to the Chapter 7 Bankruptcy being Dismissed by the Bankruptcy Court, including the Non Payment of Fees required to be paid in the Chapter 7 Bankruptcy, and Unreasonable Delay that is Prejudicial to Creditors.

Bankruptcy Code Section 706 governs Conversion in a Chapter 7 Bankruptcy. Under Bankruptcy Code Section 706(a) the Bankruptcy Debtor may Convert the Chapter 7 Bankruptcy Case to a Chapter 13 Bankruptcy, a Chapter 12 Bankruptcy or a Chapter 11 Bankruptcy, provided the Chapter 7 Bankruptcy was not already Converted from any of the fore mentioned Bankruptcies. Upon the Request of a Party In Interest, the Bankruptcy Court may Convert the Chapter 7 Bankruptcy to a Chapter 11 Bankruptcy, but the Bankruptcy Court cannot Convert a Chapter 7 Bankruptcy to a Chapter 13 Bankruptcy or a Chapter 12 Bankruptcy, unless the Chapter 7 Debtor Request such Conversion or Consents to such Conversion. If the Chapter 7 Bankruptcy Debtor is not eligible as a Debtor under another Chapter of the Bankruptcy Code, then the Chapter 7 Bankruptcy Debtor may not Convert to the other Chapter.

A Reaffirmation Agreement is an Agreement or Contract that the Chapter 7 Bankruptcy Debtor makes with a Creditor, in which the Debtor agrees to remain personally liable on a particular Debt that both the Creditor and Debtor are parties. Reaffirmation Agreements in Chapter 7 Bankruptcy are most commonly entered for automobile loans. The Debtor who wishes to retain his automobile may enter a Reaffirmation Agreement to pay all or a portion of the balance owed on the automobile loan. If the Debtor does not enter the Reaffirmation Agreement this Debt would be generally Discharged in the Bankruptcy.

Some Debtors who file Chapter 7 Bankruptcy will not be requested by the Creditor for the automobile loan, to sign enter a Reaffirmation Agreement. Some other Creditors will aggressively demand that the Debtors enter a Reaffirmation Agreement, or such Creditors will seek return of the automobile. Some Judges hold the view that a Debtor must sign a Reaffirmation Agreement, or otherwise surrender the Collateral. The Bankruptcy Attorneys at Weller Legal Group can advise you on how a Reaffirmation Agreement may or may not apply to your particular situation.

For a Reaffirmation Agreement to be valid and enforceable, it must be entered by both parties before the Discharge is entered in the Chapter 7 Bankruptcy. The Reaffirmation Agreement must contain certain terms also, in order to be considered valid and enforceable.

The Reaffirmation Agreement must include in its terms, the amount of Debt that is being reaffirmed, how that Debt is calculated, and clearly state that the personal liability of the Debtor will not be Discharged as to the Debt that is the subject of the Reaffirmation Agreement. The Chapter 7 Bankruptcy Debtor will also be required to sign a statement that such Reaffirmation does not impose and undue burden or hardship. Income and expenses of the Debtor are considered in determining undue hardship.

As your Bankruptcy Attorney, our obligations include to advise you as to the legal consequences of signing a Reaffirmation Agreement. If the Bankruptcy Judge determines that the Reaffirmation Agreement is worthy of disapproval either because the Bankruptcy Attorney does not additionally sign the Reaffirmation Agreement because he feels such Agreement creates an undue hardship upon his Client, or the Chapter 7 Bankruptcy Debtor is not represented by an Attorney, or other factors, the Bankruptcy Judge will then schedule a Hearing to determine the merits of the Reaffirmation Agreement.A Reaffirmation Agreement is an Agreement or Contract that the Chapter 7 Bankruptcy Debtor makes with a Creditor, in which the Debtor agrees to remain personally liable on a particular Debt that both the Creditor and Debtor are parties. Reaffirmation Agreements in Chapter 7 Bankruptcy are most commonly entered for automobile loans. The Debtor who wishes to retain his automobile may enter a Reaffirmation Agreement to pay all or a portion of the balance owed on the automobile loan. If the Debtor does not enter the Reaffirmation Agreement this Debt would be generally Discharged in the Bankruptcy.

Some Debtors who file Chapter 7 Bankruptcy will not be requested by the Creditor for the automobile loan, to sign enter a Reaffirmation Agreement. Some other Creditors will aggressively demand that the Debtors enter a Reaffirmation Agreement, or such Creditors will seek return of the automobile. Some Judges hold the view that a Debtor must sign a Reaffirmation Agreement, or otherwise surrender the Collateral. The Bankruptcy Attorneys at Weller Legal Group can advise you on how a Reaffirmation Agreement may or may not apply to your particular situation.

For a Reaffirmation Agreement to be valid and enforceable, it must be entered by both parties before the Discharge is entered in the Chapter 7 Bankruptcy. The Reaffirmation Agreement must contain certain terms also, in order to be considered valid and enforceable.

The Reaffirmation Agreement must include in its terms, the amount of Debt that is being reaffirmed, how that Debt is calculated, and clearly state that the personal liability of the Debtor will not be Discharged as to the Debt that is the subject of the Reaffirmation Agreement. The Chapter 7 Bankruptcy Debtor will also be required to sign a statement that such Reaffirmation does not impose and undue burden or hardship. Income and expenses of the Debtor are considered in determining undue hardship.

As your Bankruptcy Attorney, our obligations include to advise you as to the legal consequences of signing a Reaffirmation Agreement. If the Bankruptcy Judge determines that the Reaffirmation Agreement is worthy of disapproval either because the Bankruptcy Attorney does not additionally sign the Reaffirmation Agreement because he feels such Agreement creates an undue hardship upon his Client, or the Chapter 7 Bankruptcy Debtor is not represented by an Attorney, or other factors, the Bankruptcy Judge will then schedule a Hearing to determine the merits of the Reaffirmation Agreement.A Reaffirmation Agreement is an Agreement or Contract that the Chapter 7 Bankruptcy Debtor makes with a Creditor, in which the Debtor agrees to remain personally liable on a particular Debt that both the Creditor and Debtor are parties. Reaffirmation Agreements in Chapter 7 Bankruptcy are most commonly entered for automobile loans. The Debtor who wishes to retain his automobile may enter a Reaffirmation Agreement to pay all or a portion of the balance owed on the automobile loan. If the Debtor does not enter the Reaffirmation Agreement this Debt would be generally Discharged in the Bankruptcy.

Some Debtors who file Chapter 7 Bankruptcy will not be requested by the Creditor for the automobile loan, to sign enter a Reaffirmation Agreement. Some other Creditors will aggressively demand that the Debtors enter a Reaffirmation Agreement, or such Creditors will seek return of the automobile. Some Judges hold the view that a Debtor must sign a Reaffirmation Agreement, or otherwise surrender the Collateral. The Bankruptcy Attorneys at Weller Legal Group can advise you on how a Reaffirmation Agreement may or may not apply to your particular situation.

For a Reaffirmation Agreement to be valid and enforceable, it must be entered by both parties before the Discharge is entered in the Chapter 7 Bankruptcy. The Reaffirmation Agreement must contain certain terms also, in order to be considered valid and enforceable.

The Reaffirmation Agreement must include in its terms, the amount of Debt that is being reaffirmed, how that Debt is calculated, and clearly state that the personal liability of the Debtor will not be Discharged as to the Debt that is the subject of the Reaffirmation Agreement. The Chapter 7 Bankruptcy Debtor will also be required to sign a statement that such Reaffirmation does not impose and undue burden or hardship. Income and expenses of the Debtor are considered in determining undue hardship.

As your Bankruptcy Attorney, our obligations include to advise you as to the legal consequences of signing a Reaffirmation Agreement. If the Bankruptcy Judge determines that the Reaffirmation Agreement is worthy of disapproval either because the Bankruptcy Attorney does not additionally sign the Reaffirmation Agreement because he feels such Agreement creates an undue hardship upon his Client, or the Chapter 7 Bankruptcy Debtor is not represented by an Attorney, or other factors, the Bankruptcy Judge will then schedule a Hearing to determine the merits of the Reaffirmation Agreement.

When A Debtor receives a Discharge in a Chapter 7 Bankruptcy, that means that the Debtor is no longer personally liable for the majority of his Debts. In a successful Chapter 7 Bankruptcy, the Debtor usually receives his Discharge 60 to 90 days after the date first set for the Section 341 Meeting of Creditors.

In some cases, the Bankruptcy Court may deny a Discharge to a Debtor in a Chapter 7 Bankruptcy if the Debtor did not keep adequate books and financial records, or if the Debtor committed a Bankruptcy Crime, or did not follow a legal order of the Bankruptcy Court. The Chapter 7 Bankruptcy Debtor may also be denied a Discharge if he conceals Assets of the Bankruptcy Estate, or did not complete the Financial Education Course required by Bankruptcy Law.

There are many reasons a Debtor may be denied a Discharge. The best course of action for most persons is to consult and hire an experienced Bankruptcy Lawyer who is knowledgeable of the many intricacies of Bankruptcy Law.

The Chapter 7 Bankruptcy Trustee may first Liquidate the Non Exempt Assets of the Bankruptcy Estate. In addition to this, the Chapter 7 Bankruptcy Trustee has what are referred to as Avoiding Powers. The Avoiding Powers included the Power to reverse some transfers made to Creditors by the Debtor that occurred within 90 days of the filing of the Bankruptcy.

The Avoiding Powers also permits the Chapter 7 Bankruptcy Trustee to unwind Security Interests, and other Transfers of Property that occurred before the filing of the Chapter 7 Bankruptcy.

When a Debtor files a Chapter 7 Bankruptcy, a Trustee is appointed to Administer the Bankruptcy Case. The primary role of the Chapter 7 Bankruptcy Trustee is to Liquidate the Debtor’s NonExempt Assets.

If there are no NonExempt Assets, the Trustee will generally file a No Asset Report with the Bankruptcy Court. However, if there are Assets that are Non Exempt, the Assets may be Liquidated or Sold at auction, and the proceeds may be distributed to both the Creditors and the Trustee, for his Fees.

In order to file Chapter 7 Bankruptcy, the Debtor must first file a Petition. The Petition must be filed where the Debtor lives, or in the case of a business Debtor, where the principal Assets of the business are located or the business is located.

With the Petition of Bankruptcy, the Debtor must also file Schedules which includes the Debtors’ Assets, Liabilities, Current Income and Expenses, A Statement of Financial Affairs, a Schedule of Unexpired Leases and Executory Contracts.

In the Middle District of Florida, Tampa Division, the Debtor must provide copies of his last two years tax returns, copies of his last six months bank statements, and evidence of income for six months. The Trustee may also request copies of Statements showing payoffs on certain loans, copies of registration or titles of automobiles, and other Documents.

There are many alternatives to filing a Chapter 7 Bankruptcy. Some of these alternatives are other types of Bankruptcies, in particular, a Chapter 13 Bankruptcy or a Chapter 11 Bankruptcy. Many businesses, for example, corporations, partnerships or sole proprietorships, may elect to continue in their existing business and not have their Assets liquidated through a Chapter 7 Bankruptcy. Both a Chapter 13 Bankruptcy and a Chapter 11 Bankruptcy, whether the Debtor is an Individual or a Corporation or other business entity, allow the Debtor to reorganize his or its Debts and retain Assets.

In addition, other Chapters of the Bankruptcy Code may be better suited to addressing the issues confronted by the Debtor. For example, a Chapter 13 Bankruptcy is often used to stop Foreclosures on houses and allow Debtors to pay arrearages owed on such Mortgages, and sometimes, through a Mortgage Mediation Program, actually Modify the terms of the Mortgage and Note.

If the Debtor exceeds what is referred to as the State Median, the Debtor may not be able to file a Chapter 7 Bankruptcy. In such cases a Means Test is applied to determine whether the Debtor is eligible to file a Chapter 7 Bankruptcy. If the Chapter 7 Debtor’s income significantly exceeds the Median based upon where he resides and the number of persons in his household, he may not qualify to file a Chapter 7 Bankruptcy. In such cases, the filing of the Chapter 7 Bankruptcy is deemed Abusive, absent a showing of Special Circumstances. Special Circumstances in Bankruptcy are found in cases of either Additional Expenses or Adjustments of Current Monthly Income.

Our Attorneys at Jay Weller Legal Group offer many other Non Bankruptcy Alternatives to handling a Debt issue. As documented on our website, we also offer programs in Credit Counseling, Debt Management Programs, Settlements, Credit Repair, and Foreclosure Defense. At Jay Weller Legal Group we have a program that is specifically tailored to your special needs when it comes to the problem of Debt.

Another Arrow In The Quiver For The Chapter 7 Bankruptcy Attorney

11 USC 722 of the Bankruptcy Code governs Redemption of Personal Property in Bankruptcy. In a Chapter 7 Bankruptcy, Redemption is a process wherein the Debtor may pay to the Secured Creditor either the Fair Market Value of the Personal Property or the Balance of the Secured Claim, whichever is less.

11 USC 722 states as follows:

An individual debtor may, whether or not the debtor has waived the right to redeem under this section, redeem tangible personal property intended primarily for personal, family, or household use, from a lien securing a dischargeable consumer debt, if such property is exempted under section 522 of this title or has been abandoned under section 554 of this title, by paying the holder of such lien the amount of the allowed secured claim of such holder that is secured by such lien in full at the time of redemption.

In deconstructing the language of Section 722 one must take it apart. The Bankruptcy Section begins by stating that the Right of Redemption is not Waivable. This means that a Creditor cannot enforce a term in a Contract that Waives the Right of the Debtor to Redeem such property if he files Bankruptcy.

Second, the Debtor in Bankruptcy may only Redeem Tangible Personal Property intended Primarily for Personal, Family, or Household Use. This means that an Individual who files Chapter 7 Bankruptcy can Redeem his dining set that he has in his living room from Rooms To Go or the automobile that he drives the kids to soccer practice, but he would not be able to Redeem an object that his used primarily for business purposes, such as a moving truck. Third, the property must be Exempt under Section 522 or abandoned by the Trustee under Section 554 of the Bankruptcy Code. For example, in Florida the typical Exemption for Equity in an automobile is $1,000 and for personal property the typical Exemption is $1,000. These are the Exemptions usually used by Debtors in Florida who own a Homestead. If a Debtor does not own a Homestead, then the Super Exemption is available, wherein the Debtor may own $4,000 in Personal Property in addition to the $1,000 Exemption for Equity in an automobile. For example, a Debtor with a Homestead has a dining room set in his house from Kanes Furniture that has a Fair Market Value of $300 and he owes Kanes or the financing company that Kanes uses $1500. The Debtor may seek to Redeem the Property because it is Personal Property that he is using for Personal and Family use. He may also Redeem this Property because the $300 value of the dining room set does not exceed his allowable Exemption of $1,000. Assuming the Trustee abandons the Asset, the Debtor may then seek to Redeem the dining room set for $300. Upon issuance of an Order from the Bankruptcy Judge permitting the Redemption of the dining room set, and the tender of $300 by the Debtor to the Creditor, the Debtor will then own the dining room set, not subject to the lien of the Creditor. The remaining $1200 balance owed to the Creditor on the furniture loan is Discharged through the Chapter 7 Bankruptcy.

In order to Discharge Income Taxes in Chapter 7 Bankruptcy, four factors must be satisfied. First, the Debtor must satisfy what is referred to as the Three Year Rule. The Three Year Rule holds that there must be at least three years between the date the Income Tax Return was due, including Extensions, and the Bankruptcy filing date.

Secondly, the Debtor must satisfy the Two Year Rule. The Two Year Rule mandates that the Taxpayer must file his Tax Return more than two years before he files for Chapter 7 Bankruptcy. In some cases, even if the Debtor does not file a Tax Return, he can Discharge his Income Tax obligation if the Internal Revenue Service files a Substitute Return. The Substitute Return can be filed by either the Taxpayer consenting to the Return by signing it or the Internal Revenue Service can file a Substitute Return without the Taxpayer’s consent.

For purposes of the Two Year Rule, the filing date of the Tax Return is the date the Return is due for Tax Returns that are filed before the due date. If the Taxpayer files the Tax Return after the due date, then the Return is considered filed when the Internal Revenue Service receives the Tax Return.

The Debtor or Taxpayer must also satisfy the 240 Day Rule. The 240 Day Rule holds that the Tax must be Assessed more than 240 days before the Debtor files Chapter 7 Bankruptcy. If the Taxpayer enters an Offer In Compromise with the Internal Revenue Service, then the 240 day period is extended by the number of days the Offer In Compromise is pending plus 30 days. An Offer In Compromise is defined as an Offer to pay the Internal Revenue Service less than the amount sought by the taxing authority through Settlement or Compromise. One usually confronts this rule when the Internal Revenue Service Audits a prior return and Assesses additional Taxes as a result of that audit.

Fourth, in order for the Debtor to Discharge Income Tax obligations in a Chapter 7 Bankruptcy, there cannot be Tax Fraud or Tax Evasion present on the part of the Debtor or Taxpayer. A Fraudulent Return exists, for example, when the Taxpayer Intentionally fails to report income or makes Misrepresentations on the Tax Return.

The Taxpayer cannot Discharge Income Tax in a Chapter 7 Bankruptcy if he Willfully attempts to defeat or evade payment of the Tax. Examples of Willful Evasion includes instances in which the Taxpayer exhibits a pattern of failure to file Tax Returns, does not pay Taxes, or attempts to hide Income and Assets.

Finally, if the Internal Revenue Service or Taxing Authority has filed a Tax Lien against the Taxpayer, such pre-Bankruptcy Tax Lien cannot be Discharged by the Bankruptcy. Please refer to our discussion of Tax Liens for more information, including Exceptions to this Rule.

The Rules for Dischargeability of Tax Debt is very different in Chapter 13 Bankruptcy scenarios. Please refer to our discussion of Discharging Tax Obligations in Chapter 13 Bankruptcy.

Bankruptcy Code Section 554 governs Abandonment of the property of the Bankruptcy Estate. Section 554(a) states that the Bankruptcy Trustee may abandon any property of the estate that is burdensome to the estate or that is of inconsequential value and benefit to the estate. For example, if a debtor owns a home in Pennsylvania but resides and files Bankruptcy in Florida, the home in Pennsylvania is not exempt, or protected, under the Bankruptcy Laws. The Pennsylvania home does not qualify as the debtor’s Homestead, which is exempt under the Bankruptcy Laws. The Chapter 7 Bankruptcy Trustee could seek to sell or liquidate the debtor’s house because that house is a non-Homestead property. However, if the home has little or no equity, due to a large mortgage or other lien, it may not be in the Chapter 7 Bankruptcy Trustee’s benefit to sell the home. If no proceeds can be derived from the sale of the home, then no monies can be paid toward the Bankruptcy Trustee’s commission (usually 25% of the proceeds) and no monies can be paid to the creditors. If there are no significant proceeds to be gained from selling the house, the Chapter 7 Bankruptcy Trustee will commonly abandon the house.

Section 541 of the Bankruptcy Code defines what is considered property of the Estate. Any asset that is considered property of the Estate, if such asset is not protected by an Exemption provided by the Bankruptcy Code and the Florida State Exemption Statutes, is an asset that could be seized by the Chapter 7 Bankruptcy Trustee, auctioned, and distributed to the debtor’s creditors. Although an asset may be property of the Bankruptcy Estate and Non Exempt, the Chapter 7 Bankruptcy Trustee might consider that asset not worthy of an auction. For example, if a debtor owns a plot of vacant land, which is not his Homestead, the Chapter 7 Bankruptcy Trustee may consider selling that land. However, if the land has a mortgage against it, and there is little or no equity in the land, the Trustee may abandon the property because it is not in her interest to sell. If no proceeds can be derived from the sale of the vacant land, there is no point in the Chapter 7 Bankruptcy Trustee selling the land. The sale will not deliver a meaningful contribution to the creditors.

Section 548 of the Bankruptcy Code governs what are called Fraudulent Transfers and Obligations. Section 548 states the Bankruptcy Trustee may avoid any transfer of an interest of the debtor in property that was incurred by the debtor within two years of the Bankruptcy filing, if such transfer was to hinder or delay the debtor’s creditors or for which the debtor received less than a reasonable value in exchange for such transfer. This means that if a debtor puts his bank account in his mother’s name because he fears a creditor may take his monies, the Chapter 7 Bankruptcy Trustee can reverse that transaction and take the monies that were transferred to his mother. If a debtor puts his automobile in his friend’s name after his friend pays him $1.00 for his automobile, the Bankruptcy Trustee can reverse that transaction and retrieve the automobile from the friend because he paid “less than reasonable value”. Even if the debtor files after the two year mark, he can have some difficulties with the Chapter 7 Bankruptcy Trustee under the Fraudulent Conveyance Statutes, if it is determined that the debtor transferred such asset to evade his creditors. Once the transaction or transfer by the debtor is reversed by the Chapter 7 Bankruptcy Trustee, the Trustee may then seize the asset, and sell such asset at public auction. The Chapter 13 Bankruptcy Trustee can not sell such an asset but can seek to raise a debtor’s payment in a Chapter 13 Bankruptcy based on such a transfer. For example, the debtor who transfers an eight thousand dollar automobile to his cousin for $1.00 within two years of filing Chapter 13 Bankruptcy may have to pay that $8,000 to his creditors through the Chapter 13 plan over the course of thirty six (36) to sixty (60) months.