What Are The Eligibility Requirements To File For A Chapter 7 Bankruptcy?
In essence, anyone is eligible to file a Chapter 7 bankruptcy, but there are certain code requirements that may come into play based on the person’s income. If someone’s level of income is too high, then they might have to file a Chapter 13 bankruptcy and pay a percentage (or all) of their debt to creditors. If someone has the property that does not fall within the protections of the bankruptcy, which may be the case if there is $10,000 more in equity than permitted, then they may have to pay that amount to unsecured creditors. Under such circumstances, the recommendation would be for the individual to file a Chapter 13 bankruptcy and pay the $10,000 over a period of time rather than out of pocket, which is what one would need to do if they filed for a Chapter 7 bankruptcy. Aside from these requirements and unless there is some sort of fraud or a prior filing, then an individual will be eligible to file for Chapter 7 bankruptcy.
What Happens At The 341 Meeting Of Creditors In A Chapter 7 Bankruptcy?
At the 341 meeting of creditors, the trustee is assigned to swear the debtor in and then ask them a number of questions. When I worked as a staff attorney for a Chapter 13 trustee, I conducted these meetings, which include questions regarding the value of existing real estate and how those values were determined. Some jurisdictions require an appraisal, which is somewhat costly for clients. Others require a marketing analysis by a realtor, while others will accept internet values such as those found on Zillow. The purpose of the hearing is to determine whether or not the equity in a property falls within the protections of the bankruptcy exemptions. If it doesn’t, then the trustee would have some form of interest in trying to collect some money for the creditors.
At the 341 meeting of creditors, the debtor is also typically asked about vehicles they own and whether or not they hold any equity, as well as questions regarding household goods, furnishings, jewelry, antiques, collectibles, and unprotected investments. Typical investments that are protected included IRAs and ERISA-qualified retirement accounts. The trustee essentially conducts an interview to determine whether or not there are any assets that are not protected from creditors, and whether or not there is any fraud in the document itself. They will ask if any property has been transferred during the few years preceding the bankruptcy, and whether or not an inheritance has been received or is expected to be received within the timeframe that creditors would be able to collect.
What Is A Trustee In A Chapter 7 Case And What Does He Or She Do?
A Chapter 7 trustee is assigned to a Chapter 7 case by the United States trustee, and their duty is to ensure that there isn’t any fraud or issue with the documents. Their job is also to review the paperwork and conduct an interview of the debtor to verify that there aren’t any assets that may be available for creditors or any income issues that are not taking advantage of the system. As long as the debtor meets the requirements, a Chapter 7 trustee would issue a report of no distribution, which essentially indicates that they are taking their hands off of the case.
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