Chapter 7- Discharge of debts
A Chapter 7 proceeding (sometimes called a straight bankruptcy or liquidation) is a proceeding in which the debtor owes more than they own and turns over all of their property, except limited property which is exempt, to a trustee in bankruptcy, who sells the property and pays to the debtors creditors on a pro-rata basis. The debtor keeps only exempt property. The debtor, when discharged by the bankruptcy court, is forever released from all of his or her debts, excepting non-dischargeable debts.
Chapter 7 can be used by individuals or businesses. For businesses, it signals the end. The failing business's assets are liquidated and apportioned on a pro-rata basis to creditors by the trustee appointed by the court.
Chapter 7 petitioners who are individuals can keep various court personal items, tools of their trade(such as a carpenters tools) and household furnishings of a nominal value and auto (to the extent of the exemption value amount). However, most assets go to pay the debts if such assets exceed the Federal statutory exception amount..
THE 1994 AMENDMENTS HAVE DOUBLED THE FEDERAL EXEMPTIONS. STATUTORY LIMITS ON THE FEDERAL EXEMPTIONS AFTER THE AMENDMENTS INCLUDE:
* Real property $15,000 for equity in property that is used as a residence (the "homestead" exemption) Section 522 (d)(1)
* Car $2,400 in equity in a motor vehicle; Section 522 (d)(2)
* Household goods $400 in one item and $8,000 of equity in household goods and furnishings;
* Section 522 (d)(3)
* Jewelry $1,000 in jewelry; Section 522 (d)(4)
* "Roll-over" exemption of up to $7,500 of the unused homestead exemption, in any property.
* Section 522 (d)(5)
* Tools of the trade $1,500 Section 522 (d)(6)
* Unmatured life insurance Term life Section 522 (d)(7)
* Life insurance value $8,000 Section 522 (d)(8)
* Health Aids Section 522 (d)(9)
* Right to receive certain income- social security, unemployment, disability, alimony, support
* Section 522 (d)(10)
* Certain Pensions, 401K and IRA Section 522(d)(10)(e)
* Damage awards- crime victim, dependent receiving life insurance, personal injury up to $15,000 Section 522 (d)(11)
In the case of a joint petition by a husband and wife, each is entitled to the statutory exemption. Accordingly, a husband and wife would have a $30,000 homestead (house) exemption under the 1994 Amendments.
THE FOLLOWING DEBTS ARE SOME OF THE COMMON ITEMS NOT DISCHARGEABLE AND YOU STILL MUST PAY THEM:
* Taxes 523 (a) (1)
* Credit & debts incurred by false representations 523 (a)(2)
* Debts not listed on the schedules 523 (a) (3)
* Fraud 523 (a)(4)
* Alimony, Child support, Certain 523 (a)5
* Willful & malicious injury 523 (a)6
* Fines & penalties 523 (a)7
* Students loans 523 (a)8
* Personal injury while operating a car under influence or alcohol or drug 523 (a)9
* Certain equitable distribution 523 (a) 15
* Condo/ co-op fees following order for relief to membership assoc. 523 (a) 16
Just a few years ago, bankruptcies were relatively rare. But with consumer debt at an all time high, the public is becoming much more familiar with bankruptcies. Personal bankruptcies have more than doubled in the last decade.
A number of prominent businesses, among them Texaco and Johns-Manville have also declared bankruptcy. New Jersey alone is the recipient of a substantial bankruptcy caseload. The law provides debt burdened but viable companies an opportunity to negotiate debt payments with creditors and thus survive.
The bankruptcy petition asks a court to legally declare individuals or businesses officially unable to meet their debts. If the court does so, their assets are then administered for the benefit of their creditors.
The bankruptcy law can thus benefit both lenders and borrowers. On the one hand, bankruptcy provides an orderly process for dividing the borrowers property and repaying each lender as fully as possible to the extent there are any assets to liquidate. On the other hand, the law is intended to give borrowers a fresh start in rebuilding their economic life.
A Chapter 11 proceeding is frequently called a Reorganization.Ó It is generally used by corporations in financial trouble, but it may also be used by individuals in the same circumstances. Individuals who choose Chapter 11 proceedings generally are those who own and operate small businesses whose total indebtedness exceeds the qualification limits for Chapter 13 proceedings described below. However, in many cases an individual may be forced into Chapter 11 if Chapter 13 or Chapter 7 are not available. Chapter 11 and Chapter 13 proceedings are quite similar in that the debtor proposes to the bankruptcy court and his or her creditors a plan for the payment of secured and unsecured creditors over a period of time. Keep in mind that the Chapter 11 petition and subsequent proceedings are much more involved and complicated than the less costly and involved Chapter 13.
A Chapter 13 proceeding is sometimes called a Wage-earner plan". It is a bankruptcy proceeding quite similar to the Chapter 11 proceeding in that the debtor (and generally also his or her spouse) works out a plan which permits the debtors to keep their property (or some of it) while making reduced payments to creditors at modified interest rates. Finance and penalty charges and late fees on many obligations can be eliminated or reduced. At the same time, creditors are assured of fair treatment under a repayment plan administered by an independent impartial trustee. Creditors can recover some, if not all debts owed to them at collection costs far less than customary collection costs.
Chapter 13 is intended for individuals with a steady source of income. It allows a person to pay all or a portion of his or her debts, usually by extending the time for payments (generally for three to five years). Under this alternative, the debtor usually turns over to a fixed sum of money every month to a trustee, who then pays those who are owed money. Chapter 11 and 13 are expensive and complicated proceedings. The Law Office of Kenneth Vercammen does not handle Chapter 11 or Chapter 13 filings. We can provide you with names of attorneys that handle these.
Duties of a Client
* You must fully cooperate with the Law Firm and provide all information relevant to the issues involved in this matter.
* You must notify the Law Firm immediately if you move, if your telephone numbers change or if their is any change in your Chapter 7 petition.
* You must fill out the Chapter 7 petition completely and accurately.
* You must obtain a TRW or other credit report, together with the addresses of all creditors listed on the TRW, even if you dispute the claim.
* You must carefully review the draft bankruptcy petition/ Schedules for accuracy.
* You may write to each creditor and request verification of the debt.
* After the filing of the Chapter 7, if you are contacted by any creditors you must provide them with the docket number of your case, a copy of the first page of the Chapter 7 petition, and a copy of the notice for the 341 hearing.
* If you do not correctly list each creditor, their address and account number, then that debt will not be discharged.
* You must call the law office the day before the 341 hearing.
* You must bring all your papers to the 341 hearing.
* You must also pay all bills as required by this Agreement. We request that you not provide the law office's name and phone number to any creditors until after the Petition has been filed.
* If you do not comply with these requirements, the Law Firm may withdraw from representing you. The Law Firm will also withdraw at your request.
Costs And Experts. In addition to legal fees, you must pay the following costs and expenses if applicable; experts' fees, court costs, accountants' fees, appraisers' fees, service fees, investigators' fees, deposition costs, messenger services, parking, telephone toll calls, and photocopying, and any other necessary expenses in this matter.
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Kenneth Vercammen was the NJ State Bar Municipal Court Attorney of the Year and past president of the Middlesex County Municipal Prosecutor's Association.
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