How Certain Chapters of Bankruptcy Works

Chapter Seven

This chapter allows an individual liquidation, which is the sale of the debtor’s nonexempt property where the proceeds are given to the creditors.  The debtor must file a petition with the bankruptcy court where he lives or where his place of business is located.  Along with this petition the debtor must file with the court all of his assets and liabilities, his current income and expenses, list of financial affairs and any contracts or leases he may have.  The case trustee will also need last year’s tax returns and any tax returns that were filed during the bankruptcy case.

If the debtor has mostly consumer debts they are required to file with a credit counseling company.  After they do this they must submit a copy of the repayment plan, the evidence of income within the past 60 days, if there is any and a statement of any interest that is due to the federal or state in regards to tuition.  A husband and wife have the choice of whether or not they want to file separately or individually. 

After the petition is filed, the case trustee will hold a meeting with the creditors.  This meeting can be held no later than 60 days after the petition is filed.  The debtor must submit all documents that are required, and must attend the meetings, so certain questions can be asked and discussed.  To protect the debtor, the bankruptcy judge is not allowed to attend the meetings. 

Chapter Thirteen

The debtor must file a petition with the court where he has residence.  Again, unless the court decides otherwise, the debtor must file with the court all of his assets and liabilities, current income and expenses, any contracts or leases and a list of all financial affairs.  If the debtor has filed with a credit counseling agency, those records and the repayment plans must submitted to the court as well.  Along with the repayment plan, the debtor must submit any income 60 days prior to the filing, a copy of net income or increase in income and any interest that is due to the federal or state in regards to tuition.  The case trustee will also need last year’s tax returns, any returns filed during the bankruptcy and all tax returns that were not filed in previous years.

When a debtor files for chapter 13 an impartial trustee is assigned to act as the disbursing agent by collecting the payments from the debtor and paying the creditors.  One important thing that distinguishes chapter 13 from chapter 7 is that any person who was responsible for the debtor is protected.  Collection agencies are not allowed to call them for payments.  Also, under chapter 13, the debtor can stop any foreclosure agreements as long as the bankruptcy petition is filed before the foreclosure is completed.  If the debtor follows orders and has everything correct the meeting with the case trustee and the creditors will be easygoing.