Chapter 7 Bankruptcy

When someone is dealing with financial hardship, often a chapter 7 bankruptcy filing can be the best choice to help them deal with their financial concerns. A chapter 7 is the most common and straightforward form of bankruptcy. It can help most people address the debts they need to eliminate and allow them to keep the debts they might want to retain such as an automobile loan or a home loan. However, chapter 7 is not the best choice for everyone and during our free office or telephone consultation I will help you determine if chapter 7 is the right choice for you. If not, then we can consider at non-bankruptcy options or see if chapter 13 might be a better choice.

Starting the filing process.

The beginning of the chapter 7 filing process involves getting some information and documents together that we will need to prepare the official forms such as pay stubs, tax returns, creditor statements and bank statements. There is a detailed list of all the documents we need on the last page of my client questionnaire. Once you have dropped off the information available, I will prepare your official bankruptcy forms and then we will schedule a telephone call or office meeting to review the documents in detail to make sure everything is accurate and complete. Since there is a large amount of paperwork to review, these meetings usually take about 90 minutes up to two hours.  Once we have reviewed the documents and have  made sure they are completely accurate, we will then be ready  to file the case with the court. Upon filing the case, the court will enter order called the “automatic stay” that will protect you from your creditors. It essentially mandates the creditors must stop all collection activity including telephone calls, emails, lawsuits, and garnishments. If you are being garnished when we file your case, I will send a letter to your employer and, if necessary, also to the law firm that filed a lawsuit to request the termination of the garnishment.

Chapter 7 bankruptcy hearing.

About 30 days after the case is filed with the court, we will have a hearing with the chapter 7 bankruptcy trustee. Due to the coronavirus pandemic, these hearings are currently being held by telephone and it appears that will continue into the near future. The purpose of these hearings is for the trustee to be able to ask you questions regarding your documents filed with the court, and to also ask you about any  property you might own and any financial transactions that the trustee is concerned about. These hearings are straightforward and typically take less than 10 minutes per case. Before the hearing takes place,  we will have a telephone call or office meeting to go over what you can expect at the hearing and make sure you are well prepared. Once the trustee has completed the hearing, he or she will let the judge know if there is any money that can be raised for creditors. If not, then your case will be what we call a  “no asset case,“  which means that no money or property will be taken from you to give money to creditors. You can click here  to learn more about what property is or is not protected in a chapter 7 bankruptcy in Oregon. Most of my clients can  file Chapter 7 and keep all  their  property and possessions.

Entry of discharge and closing of case.

After the bankruptcy hearing with the Chapter 7 trustee there is a mandatory 60 day waiting period. This is when creditors can file any objections to your discharge if they think that any money was borrowed improperly or there was fraud. However, these objections are quite rare, and we will have a discussion regarding your situation to see if you need to be concerned about any objections from creditors. Once the deadline for creditor objections runs out the court will be ready to enter your discharge. The discharge is an order signed by the judge that indicates to your creditors that the debts have been discharged and they can no longer collect from you.  Upon the entry of the discharge the court will mail you a copy by regular mail and will also send notice of the discharged all the creditors by regular mail or electronically. In addition, I will send you a copy of the chapter 7 discharge  by email so that you have an electronic copy.  Once the discharge is entered the court will usually close the case the same day and the chapter 7 process will be completed. From start to finish an average chapter 7 bankruptcy in Oregon will usually take about 90-100 days to complete.

Impact of Chapter 7 Discharge.

Upon the entry of the discharge your creditors are forbidden from collecting  any debts that have been discharged. If any creditor tries to collect a debt that has been discharged, you can take advantage of the chapter 7 bankruptcy law and reopen the bankruptcy case to ask the court to punish the creditor. This could include  the court ordering them to pay your attorney’s fees as well as compensate you for damages, including emotional distress damages. Fortunately,  it is rare that I have a client contact me because a creditor is improperly trying to collect a debt that has been discharged. Most of the time the creditors abide by the terms of the discharge order.

Reaffirmation Agreements in Chapter 7 Bankruptcy.

A person filing a Chapter 7 bankruptcy may decide they would like to keep certain debts such as an automobile loan or home loan. We usually do this through what we call reaffirmation. To reaffirm a debt, you must sign and file a reaffirmation agreement with the court. This process is fairly straightforward, and I will help you each step of the way. Also, you usually do not need to attend a court hearing to reaffirm a debt. The effect of a reaffirmation agreement is that you will not receive a discharge of the debt that was reaffirmed. The main upside of reaffirming is that the creditor should treat your account as if the bankruptcy was never filed and that may include continuing to report your payment status to the credit bureaus and allow you to have online access and set up automatic payments. The main downside of reaffirming is that you will owe this debt again and if you default later, the creditor will have the right to repossess the vehicle and then pursue you for any balance owed after they sell the vehicle. So, it is important to make sure that you can afford the payments before deciding to reaffirm a particular debt.

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