Chapter 7
1. Who May File a Chapter 7?
A chapter 7 petition may be filed by any individual or entity, i.e., corporations, partnerships, business associations, except a railroad. Section 109(b). Banks and insurance companies may not file any bankruptcy chapter. Section 109(b)(2). The debtor need not be a resident of the United States. An individual whose debts are primarily consumer debts may file chapter 7 only if he pa
2. Advantages for the Debtor
The typical chapter 7 debtor has no assets that are subject to seizure by the trustee. In other words, all assets owned by the dto the debtor is that he loses no assets but at the same time all of his debts are discharged.
3. Disadvantages for the Debtor
The debtor will lose his assets which have equity and are not exempt. The debtor cannot change his mind.
4. After the Petition is Filed
A trustee is assigned to the case by the court clerk when the case is filed. Section 701 and 702. The trustee's job is to seize all property of the debtor that has equity which is not exempt, sell it and distribute the money to the creditors. Section 704. The trustee typically also investigates prepetition transfers of property be the debtor to determine if the transfer can be une debtor owns no property with equity which is not exempt.
4.1 Notice to Creditors
When the case is filed, the court clerk sends a notice of the filing of the case to all of the creditors listed by the debtor in the schedules. The notice provides the name of the trustee, the date and location of the first meeting of creditors and other information including the last date by which creditors may object to the discharge.
5. The First Meeting of Creditors
The first meeting of creditors usually takes place six to eight weeks after the case is filed. Section 341(a) It is conducted by the trustee assigned to the case in a meeting room at the U.S. Trustee's Office. The trustee typically asks a few questions regarding the schedules that have been filed and the meeting is concluded. Sometimes the trustee will ask for documents such as financial statements for a business, bank statements, or information regarding sales of property in the past and will continue to meeting to allow the returns to be provided. Creditors typically do not appear at the meeting. The U.S. Trustee will, on occasion, attend the meeting and question the debtor typically seeking information to determine whether or not a motion should be filed seeing dismissal for abuse.
6. Providing Tax Returns
The debtor must send the trustee, at least 7 days before the meeting of creditors, a copy of the debtor's most recent year's any creditor who requests it. Section 521(e)(2)
7. Giving Creditors an Opportunity to Object to the Discharge
Creditors may file a complaint asking the court to deny the discharge, Section 727, or to declare that a particular debt is non-dischargeable. Section 523. The last day to file these complaints is 60 days after the first date set for the first meeting of creditors. This date can be extended only by the judge after a hearing. The trustee and the U.S. Trustee are also authorized to file complaints to deny the discharge. Section 727(c)(1) If no complaints regarding the discharge are filed, the discharge is “ activities of the trustee.
8. Closing the Case
Once the trustee determines that there are no assets to sell, the trustee will file a form with the court called a No Asset Repo, and the trustee has filed the No Asset Report, the case is closed by the court clerk.
9. Procedure When There are Assets
When there are assets to administer in a chapter 7 case, the trustee will usually retain an attorney to assist him. The trustee will give notice to creditors that they must file Proofs of Claim on or before a certain date. The trustee will file a motion asking the court to approve the sale of the asset. Section 363(b). The sale will be subject to overbids and the debtor may bid at the hearing. Often in these cases, the debtor is the purchaser and there are no overbidders. The trustee will then file an accounting, advise the court of the funds available to distribute and the case will be closed after that.
9.1 When the Debtor Owns an Operating Business
The bankruptcy code permits the trustee to operate a business only if the court approves the operation and then only for a limited period. Section 721 Trustees rarely operate the business for long. It is common for the trustee to close an operating business immediately.
10. Entry of Discharge and Closing of the Case
The entry of the debtor's discharge and the closing of the bankruptcy case have nothing to do with each other. The discharge is entered once the time to object to the discharge has run. If someone has objected to the discharge, the discharge is not entered until the objection is resolved.
typically filed within a month or two after the first meeting of creditors, as soon as the trustee determines that there are no assets of the debtor which have equity and are not exempt. The final accounting is filed when the trustee has found assets to sell. The final accounting may be a year or two or more after the case begins.
11. Conversion of the Chapter 7
Conversion of the Chapter 7 case to another Chapter during the case must be given notice and an opportunity to object to the conversion.