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Even if filing jointly, a husband and wife are subject to all the document filing requirements of individual debtors.
The number of installments is limited to four, and the debtor must make the final installment no later than 120 days after filing the petition.
In addition, the Bankruptcy Code will allow the debtor to keep certain "exempt" property; but a trustee will liquidate the debtor's remaining assets. An individual cannot file under chapter 7 or any other chapter, however, if during the preceding 180 days a prior bankruptcy petition was dismissed due to the debtor's willful failure to appear before the court or comply with orders of the court, or the debtor voluntarily dismissed the previous case after creditors sought relief from the bankruptcy court to recover property upon which they hold liens.
Accordingly, potential debtors should realize that the filing of a petition under chapter 7 may result in the loss of property.
In addition, if the debtor is a business, the bankruptcy court may authorize the trustee to operate the business for a limited period of time, if such operation will benefit creditors and enhance the liquidation of the estate. Accordingly, the debtor is not particularly interested in the trustee's disposition of the estate assets, except with respect to the payment of those debts which for some reason are not dischargeable in the bankruptcy case. The debtor must sign a written reaffirmation agreement and file it with the court. The attorney must also certify that the debtor was fully informed and voluntarily made the agreement and that reaffirmation of the debt will not create an undue hardship for the debtor or the debtor's dependants.
Thus, the debtor will not be permitted to convert the case repeatedly from one chapter to another. The trustee may also attempt to recover money or property under the trustee's "avoiding powers." The trustee's avoiding powers include the power to: set aside preferential transfers made to creditors within 90 days before the petition; undo security interests and other prepetition transfers of property that were not properly perfected under nonbankruptcy law at the time of the petition; and pursue nonbankruptcy claims such as fraudulent conveyance and bulk transfer remedies available under state law. The debtor is only paid if all other classes of claims have been paid in full. If the debtor decides to reaffirm a debt, he or she must do so before the discharge is entered. If the debtor was represented by an attorney in connection with the reaffirmation agreement, the attorney must certify in writing that he or she advised the debtor of the legal effect and consequences of the agreement, including a default under the agreement.
To qualify for relief under chapter 7 of the Bankruptcy Code, the debtor may be an individual, a partnership, or a corporation or other business entity.
(The Official Forms may be purchased at legal stationery stores or download.
If a joint petition is filed, only one filing fee, one administrative fee, and one trustee surcharge are charged.
For cause shown, the court may extend the time of any installment, provided that the last installment is paid not later than 180 days after filing the petition. The debtor may also pay the administrative fee and the trustee surcharge in installments. Filing a petition under chapter 7 "automatically stays" (stops) most collection actions against the debtor or the debtor's property. Between 21 and 40 days after the petition is filed, the case trustee (described below) will hold a meeting of creditors.
Sole proprietorships may also be eligible for relief under chapter 13 of the Bankruptcy Code. If the debtor's "current monthly income" (1) is more than the state median, the Bankruptcy Code requires application of a "means test" to determine whether the chapter 7 filing is presumptively abusive. Debtors should also be aware that out-of-court agreements with creditors or debt counseling services may provide an alternative to a bankruptcy filing. One of the primary purposes of bankruptcy is to discharge certain debts to give an honest individual debtor a "fresh start." The debtor has no liability for discharged debts. A chapter 7 case begins with the debtor filing a petition with the bankruptcy court serving the area where the individual lives or where the business debtor is organized or has its principal place of business or principal assets.
In addition, individual debtors who have regular income may seek an adjustment of debts under chapter 13 of the Bankruptcy Code. Abuse is presumed if the debtor's aggregate current monthly income over 5 years, net of certain statutorily allowed expenses, is more than (i) ,850, or (ii) 25% of the debtor's nonpriority unsecured debt, as long as that amount is at least ,700. A chapter 7 bankruptcy case does not involve the filing of a plan of repayment as in chapter 13. In addition, no individual may be a debtor under chapter 7 or any chapter of the Bankruptcy Code unless he or she has, within 180 days before filing, received credit counseling from an approved credit counseling agency either in an individual or group briefing. In a chapter 7 case, however, a discharge is only available to individual debtors, not to partnerships or corporations. (3) In addition to the petition, the debtor must also file with the court: (1) schedules of assets and liabilities; (2) a schedule of current income and expenditures; (3) a statement of financial affairs; and (4) a schedule of executory contracts and unexpired leases.