Our Bankruptcy Experience is to your benefit! For over 24 years I have handled numerous bankruptcy matters.  This representation has included Debtor, Creditor and even Trustee representation in all aspects of Bankruptcy Cases. This representation has included unique solutions such as successfully filing a chapter 13 bankruptcy for a client which allowed her time to re-build her home and then sell it at a profit; successfully having an heir step in as a successor Debtor-in-Possession for a client who unexpectedly passed away during the course of the bankruptcy so that real estate could be marketed and sold rather than having the bankruptcy dismissed upon my client's death, thus benefitting the estate and holding off a foreclosing creditor. In these and other cases I have been fortunate to have the breadth and depth of experience in other legal areas to find unique solutions that might otherwise be missed.  If you are in need of bankruptcy assistance rest assured that we are well equipped to handle your case!

BANKRUPTCY - A FRESH START

I.  INTRODUCTION

Often, individuals find themselves facing insurmountable financial obstacles through no fault of their own.  Regardless of the reason for your financial indebtedness, Bankruptcy can often bring the relief from debt that you need.  It is our hope that the explanation below can assist you in deciding what course of action you should take.

II.  OVERVIEW OF BANKRUPTCY, ITS GOALS AND PHILOSOPHY

"Bankruptcy" is a procedure that was anticipated by our Country's Founding Fathers and is included in the United States Constitution.  Rest assured, you are not the first person who has faced with this prospect and will not be the last.  However, Bankruptcy is a court of "Equity" which seeks to have you do the best you can for most of your creditors while affording you an opportunity to get a "fresh start".  The Bankruptcy Code seeks to give you a fresh start in the following ways.

AUTOMATIC STAY.  First, it seeks to keep Creditors from suing you, foreclosing on your home, repossessing your car and garnishing your wages.  This is done by the imposition of a court injunction that is called the "automatic stay" at the time your bankruptcy case is commenced.  This "automatic stay" prohibits your creditors from taking action against you in the bankruptcy until your discharge is granted except in instances where your creditors are able to get permission from the bankruptcy court after notice to you and your attorney and a hearing held by the court. 

DISCHARGE.  Second, it seeks to relieve you of most, and in many instances all, of your debts.  In Bankruptcy terminology this is referred to as "discharge" or "discharge of indebtedness" which simple means that after your bankruptcy you will no longer have to pay the debts for which Bankruptcy will allow a "discharge". 

EXEMPTIONS.  Third, it seeks to allow you to retain certain possessions with which is felt you can get your fresh start.  Those possessions are referred to as "exempt assets" or "exemptions".  To facilitate a smooth process a "Trustee" is appointed in Chapter 7, 12 and 13 Bankruptcies, and, in rare instances, Chapter 11 Bankruptcies. 

BANKRUPTCY ESTATE.  The Trustee that is appointed has certain responsibilities and obligations with respect to your "non-exempt" possessions, you and your creditors.  Your non-exempt assets become part of the "Bankruptcy Estate".  Below, I have outlined Chapter 7, Chapter 11, Chapter 12, and Chapter 13 as well as the general procedures and timelines for each.  Please also read below the information regarding "means testing" which is important for you to know in connection with your Bankruptcy Filing.

GENERAL PROCESS.  While the variations to the general bankruptcy process are described in the various types of bankruptcies below, the process is generally as follows.

PRE-FILING.  Prior to filing a bankruptcy, every consumer debtor must complete a consumer credit counseling course conducted by a credit counseling agency approved by the United States Trustee.   Upon the completion of that course you will be issued a certification which must be filed with your bankruptcy petition. 

COMMENCEMENT.  Individuals voluntarily submit themselves to the jurisdiction of the bankruptcy court by filing a Bankruptcy Petition.  That petition includes a schedules of their assets, exemptions, debts and creditors, your income, your expenses and a statement of financial affairs which essentially sets out in somewhat general detail, income you have earned, creditors you have paid, financial accounts you have maintained, financial losses suffered by you and some of the causes, financial transactions including significant gifts given to others.  You also complete a "means testing form", discussed below.  Your petition and the accompanying schedules, statement of financial affairs and means testing are sworn to by you under penalty of perjury.  Lying on a bankruptcy petition, failing to honestly disclose information regarding your debts, creditors and assets is a federal crime.  Despite popular belief otherwise, ALL DEBTS AND ALL ASSETS MUST BE DISCLOSED.  If you are represented by an attorney, your petition will be electronically filed.  The United States Bankruptcy Court charges a filing fee.  That fee varies depending upon which chapter you file.

MEANS TESTING.  In 2005, Congress concluded that there were people with significant incomes who were improperly using Chapter 7 bankruptcies to discharge debts which, with some minimal effort, they could pay.  In an effort to curb what it felt was an abuse of the system, it amended the Bankruptcy process to require debtors to complete what is referred to as "means" testing.  The purpose of means testing is to get creditors paid to the extent possible.  The means testing form looks at your income and first determines whether you should be allowed, based upon that income, to file a chapter 7 Bankruptcy.  It does that by looking at tables to determine whether your household income, based upon where you live and the size of your family, is significant enough to require the payment of some of your debts through a chapter 13 bankruptcy proceeding.  It should be emphasized that this does not mean that if you were forced into a chapter 13 bankruptcy that you would pay even most of your debts (as discussed below).  At that point the means testing, using regional tables, determines what your reasonable living expenses ought to be.  If the form determines that you could pay twenty-five percent (25%) of your "unsecured" debts through the use of your paycheck after paying your reasonable living expenses over a three to five year plan, you will be required to file a Chapter 13 Bankruptcy if you wish to proceed with a bankruptcy.  There are exceptions for veterans and individuals with significant health and medical expenses.

COURT PROCEEDINGS.  Anyone filing a bankruptcy is guaranteed at least one trip to the bankruptcy court to attend an initial hearing.  That hearing is known as "The First Meeting of Creditors" or "341 Meeting" and is discussed below.  In rare instances, there may be other court proceedings that an individual may have to attend. 

FIRST MEETING OF CREDITORS.  Upon filing your bankruptcy petition a date will be set for an initial court appearance.  As noted above, this may be the only time that you have to show up for bankruptcy court.  That hearing or meeting is conducted by the Trustee assigned to your case.  You must attend.  Your attorney will also attend with you.  Any of your creditors can attend, but, rarely do they and even when they do, only one or two generally show up.  Your First Meeting of Creditors is scheduled along with a number of other individuals who have filed for bankruptcy.  Consequently, while your First Meeting will be relatively short, you may have to wait a while for the meetings to be concluded for the other meetings ahead of you.  Again, this is usually the only time you will have to appear in court.

Below is a discussion of the most commonly utilized Consumer Bankruptcy Chapters.

III.  Chapter 7 - The Straight Liquidation

Chapter 7 is the most common of the Bankruptcy Proceedings.  It is often referred to as the "straight liquidation".  The overall concept is that you will turn over all of your non-exempt assets to the Bankruptcy Trustee who will then liquidate the funds to pay a portion of your debts.  However, as noted above, you are entitled to "exemptions" which means that you will keep many of your possessions.  In fact, in most Chapter 7 Bankruptcies, the individuals filing bankruptcy end up keeping all of their possessions.

CHAPTER 7 PROCESS.

In addition to the attorneys? fees charged for your Chapter 7, the Bankruptcy Court charges a filing fee which is currently $299.00.   At the time your case is filed and the automatic stay entered, a Chapter 7 Trustee will be assigned.  The Chapter 7 Trustee is charged with liquidating any non-exempt assets you own, which are now part of the Chapter 7 Bankruptcy Estate.  

At your first meeting of creditors, your trustee will ask you questions regarding your debts, assets and financial affairs to determine, in part, funds to pay to your creditors can be derived from the sale of the estate assets.   At the end of the First Meeting, as is frequently the case, the Chapter 7 Trustee may file a report of non-distribution which means that either all of your assets are exempt from the estate or the equity in the non-exempt assets does not merit liquidation because after the asset is sold, the costs of sale is paid and any exemption amounts are paid, there won?t be any thing left to pay to your creditors.

A frequent question asked is whether a home, car or other possessions that are subject to a loan can be kept by a Chapter 7 Debtor.  In many instances the answer is ?yes?.   However there are several factors that will apply.  If a Chapter 7 Debtor is significantly behind in payments, unless that Debtor has a way to immediately make up loan arrearages, that Debtor will probably not be able to retain their home or car after the Bankruptcy.  In the event that a Debtor has such arrearages, a Chapter 13 Bankruptcy (discussed below) may prove to be a better option.

If the Trustee determines that a home or car subject to a loan can be sold and that there will be monies left over after paying the Debtor?s exemption and the costs of sale, the Trustee is entitled to sell the asset. 

Where a home or car is subject to a loan, assuming that the Trustee has no reason to sell the asset (as discussed above) the Debtor must file, at the commencement of the Chapter 7 Case, a statement of intention which sets forth whether the Debtor intends to ?re-affirm? the debt which means that you agree to obligate yourself to the same terms and conditions that existed prior to the Bankruptcy Filing.  The court may not approve a reaffirmation of a debt if it imposes a severe hardship on the Debtor or a dependent of the Debtor.

The discharge in a Chapter 7 Bankruptcy is scheduled by the Bankruptcy Code to be granted sixty days after the first meeting of creditors.  In a Chapter 7, creditors can object to the discharge of the debt owed to them if certain conditions exist.  For example, a debt resulting from fraud is not dischargeable.  Additionally, both creditors and the Trustee can object to the Discharge if the Debtor has engaged in certain wrongful activities in connection with the Chapter 7 Bankruptcy.  This includes failing to disclose assets that the Debtor owns and other fraudulent behavior in connection with the Bankruptcy.

Typically, Chapter 7 Bankruptcy cases are closed within a six month period if they are no asset cases and if there are no other proceedings affecting the   Debtor?s receipt of a discharge.

IV.  CHAPTER 13 ? WAGE EARNER PLAN

The chapter 13 differs from the Chapter 7 in that   liquidation of property and possessions is not the goal, but rather Chapter 13 seeks to have the Debtor make monthly payments in attempt to get some payment to the Debtor?s creditors.  It should be noted that rarely does a Chapter 13 result in all of a Debtor?s indebtedness being paid and frequently credit card creditors receive nothing in a Chapter 13 Bankruptcy.

CHAPTER 13 PROCESS.  The Court filing fee for a Chapter 13 Bankruptcy case is currently $274.00.  In addition to the filing of Petition, Schedules, Statement of Financial Affairs and Means Testing, a Chapter 13 Debtor is required to file a Chapter 13 plan which outlines, in part, the amount of the periodic payments committed to the plan and how those payments will be distributed.  The Debtor is required, in part, to commit all of the Debtor?s ?net disposable income? on a monthly basis to the plan.  ?Net Disposable Income? means the amount left over from the Debtor?s take home pay after deducting the Debtor?s reasonable monthly living expenses.

The Chapter 13 Trustee will conduct the First Meeting of Creditors and will seek to determine whether the plan complies with the Bankruptcy Code.  Shortly after the First Meeting, a confirmation hearing on the plan will be held at which time the Bankruptcy Judge assigned to the case will consider the Chapter 13 plan filed by the Debtor along with any objections filed by the Trustee and any Creditor.   The plan will be confirmed if it complies with the requirements of the Bankruptcy Code despite objections that may be filed. 

Upon the filing of the Chapter 13 case, the Debtor must immediately begin making payments.  Those payments are made to the Chapter 13 Trustee.  However, in most cases, the Trustee will insist that the Debtor?s employer remit plan payments directly from the Debtor?s paycheck. 

As noted above, the Chapter 13 Bankruptcy may present the best option for a Debtor who is significantly behind on home or car loan payments.  This is because those amounts can be scheduled and paid separately in the plan over the three to five year period of the plan thus making it more feasible for the Debtor to keep the mortgage current.

A chapter 13 Bankruptcy will last three to five years.  If a Debtor is unable to make payments under the plan, the Debtor can choose to convert the bankruptcy to another Chapter or dismiss the Bankruptcy altogether.

V. OTHER BANKRUPTCY OPTIONS

Chapter 11 (Business Reorganization) and Chapter 12 (Family Farmer) are also bankruptcy provisions available to Debtors.  However, because they rarely provide better relief for most Debtors, they are not discussed here.  Please contact us if you wish to learn more about these options.

THE BANKRUPTCY CODE IS A COMPLEX PIECE OF LEGISLATION.  THIS OVERVIEW IS MERELY INTENDED TO GIVE YOU A GENERAL IDEA WHAT TO EXPECT.  IT IS NOT INTENDED TO MAKE YOU AN EXPERT IN BANKRUPTCY.  DO NOT USE THIS OVERVIEW TO BE YOUR OWN ATTORNEY.  A DISCHARGE IN A CHAPTER 7 BANKRUPTCY CAN ONLY BE GRANTED ONCE EVERY EIGHT YEARS AND ONLY ONCE EVERY FOUR YEARS IN A CHAPTER 13 BANKRUPTCY.  THEREFORE, REPRESENTING YOURSELF IN A BANKRUPTCY IS ILL-ADVISED AND IS AN EXTREMELY RISKY PROPOSITION WITH DIRE CONSEQUENCES IF YOU MAKE A MISTAKE. DO NOT USE THIS INFORMATION TO REPRESENT YOURSELF!!!

PLEASE CONTACT US TODAY FOR A CONSULTATION!

RAYMOND V. GESSEL, P.S.

1048 WEST JAMES ST STE 102, KENT, WA 98032

 (253) 856-2745

RAYMOND@RAYMONDGESSEL.COM

We Listen.  We Advise.  We Act.