Bankruptcy 

Chapter 7 for Individual Consumer Debtors

Informally called “straight bankruptcy,” Chapter 7, a liquidation proceeding, is the most common form of Bankruptcy filed in the U.S. today. This form of bankruptcy may be right for you if you meet the above criteria.

The Chapter 7 Process – What should I Expect?

First, an initial consultation is of utmost importance in order to evaluate your financial situation. Your debts, income, expenses and personal property will be assessed in order to ascertain whether a Chapter 7 filing is the best course of legal action for you. Once we obtain all of your relevant information and documentation, we can start preparing your Bankruptcy Petition and Schedules and subsequently file them with the appropriate court. Shortly thereafter, a bankruptcy trustee will be appointed, to whom you will turn over all non-exempt property (if any such property exists) and who will then convert it to cash for distribution among the creditors. You are entitled to keep a limited amount of property which qualifies as exempt and is protected.

The following are examples of assets which are exempt in Louisiana:

• A portion of the equity in your home
• One car of limited value
• Most household items such as furniture, TV, radio, appliances
• Personal property such as clothing or a wedding ring
• Most Public Benefits such as Social Security, Disability, Veterans Benefits, Worker’s Compensation
• Alimony, Child Support
• Qualified Retirement Accounts and Pensions
• The Trustee is responsible for selling or “liquidating” those assets that do not fall within the allotted property exemptions, in order to repay your creditors.

From the moment your bankruptcy petitions, schedules and related documents are filed with the court, you are granted an automatic stay, which in essence is protection under 11 U.S.C. 362 of the Bankruptcy Code. From that moment and through the duration of your bankruptcy proceeding, it is strictly prohibited for creditors to harass you. In addition, during this period, your wages cannot be garnished (any current garnishments are lifted) and mortgage foreclosures are halted.

Roughly 30-40 days after your Bankruptcy filing, you will attend a Section 341(a) Meeting of Creditors with the Bankruptcy Trustee. This meeting is brief and the trustee will ask you several questions on the record.

Usually 60 days after your Section 341(a) Meeting of Creditors you will receive a discharge of indebtedness in the form of a discharge notice for all dischargeable debts, releasing you from personal liability for those debts.

Chapter 13 for Adjustment of Debts

Also known as “Adjustment of Debts of an Individual with Regular Annual Income,” Chapter 13 provides debt relief for individuals or consumers. Chapter 13 differs from Chapter 7 in the respect that it enables you to keep valuable assets, like a house, while making payments to creditors (through the trustee) based on your anticipated income over the life of the plan (usually three to five years). At a confirmation hearing, the court either approves or disapproves the plan.

Filing under Chapter 13 of the Bankruptcy Code affords you the opportunity to repay a percentage of or 100% of your debts under better terms ( i.e. lower or no interest). In essence, a Chapter 13 Bankruptcy involves the restructuring of debts which allows you to use whatever disposable income you may have in the future to pay off your creditors. Filing Chapter 13 Bankruptcy is therefore appropriate for a debtor who has a regular income, and thus can afford to request such adjustments or reductions.

The United States Bankruptcy Code gives you a ceiling of 5 years, within which your creditors must be paid back. While your attorney will safeguard your interests, the entire process is carried out under the supervision of the court.

While debtors are allowed to keep all of their property, the court approves a plan for repayment. A written plan is created giving details of all the scheduled payments that will occur, and the duration of the same. The repayment generally begins within 30 days after the case is filed. Usually, monthly payments are made directly to the appointed trustee who then disburses the money to the creditors as per the plan. Also, as per the law, the creditors must strictly adhere to the repayment plan approved by the court and are in fact prohibited from collecting on any claims from the debtor.

Another advantage of a Chapter 13 filing is that a repayment plan can be confirmed even if creditors do not agree with the terms of the plan. The creditors may object, but the court decides if such objections are merit-based.