Louis B. Dvorak
Attorney at Law
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Por ayuda en espanol, por favor marca (541) 280-1850 y pregunta por Yesenia Stedman

What is Chapter 7 and how does it Work?

Chapter 7 is that part of the Bankruptcy Code that deals with liquidation. 11 U.S. Code is that part of federal law that covers bankruptcy. A person who files under Chapter 7 is called a debtor in the Code. In a Chapter 7 case, the debtor must turn over his or her 'nonexempt' property to a trustee, who then sells the property for cash and pays the debtor’s creditors. In return, the debtor receives a Chapter 7 discharge, if he or she pays the filing fee, is eligible for such a discharge, and obeys the orders and rules of the U.S. Bankruptcy Court, a branch of the US District Court to which bankruptcy cases are delegated. All the property of most people who file Chapter 7 is on the exempt list, so they don't lose their home or any possessions. Please refer to the button 'Property I may keep.' Bankruptcy filings in which there is no distribution to creditors are called 'no asset cases.'

What debts are not dischargeable under Chapter 7?

"All debts of any kind or amount, including out-of-state debts, are dischargeable under Chapter 7, except those listed below:

(1) Debts for certain taxes, including income tax for which a return was first due within three years of filing the case, or if the return was filed late, filed within up to 240 days before filing the bankruptcy.

(2) If the creditor files a complaint, and if the court so rules, debts for obtaining money, property, services, or credit by means of false pretenses, fraud, or a false financial statement. For example, there is a rebuttable presumption that if the debtor borrowed over $500 to buy luxury goods or services within 90 days before filing, that the debtor never intended to repay. If a debtor transfers a credit card balance of over $750 within 70 days of filing, that debt is presumed to be non-dischargeable.

(3) Debts not listed on the debtor’s Chapter 7 schedules, unless the creditor knew of the case in time to file a proof of claim, or it was a “no asset” case, in which no one got to file proof of claim anyway.

(4) If the creditor files a complaint and the court so rules, debts resulting from fraud, embezzlement or larceny. An economical response to such a complaint is often to convert the case to Chapter 13.

(5) Debts for alimony, maintenance, child support, or property settlement, with very limited hardship exceptions.

(6) If the creditor files a complaint, and if the court so rules, debts for intentional or malicious injury to the person or property of another.

(7) Debts for certain fines, criminal sentences for restitution, and penalties.

(8) Debts for educational benefits and student loans that are guaranteed by a government or non-profit organization, unless the debtor files a complaint, and the court rules that not discharging the debt would impose an undue hardship on the debtor, and his or her dependents, usually after the debtor has been trying to pay for 10 years or more.

(9) Debts for wrongful death or personal injury caused by the debtor driving while intoxicated.

(10) Debts that were or could have been listed in a previous bankruptcy case of the debtor in which the debtor did not receive a discharge.

However, many of these debts may be discharged under Chapter 13. Please refer to the question on Chapter 13 discharge."

What persons are not eligible for a Chapter 7 discharge ?

"The following persons are not eligible for a Chapter 7 discharge:

(1) A person who has been granted a discharge in a Chapter 7 case file within the last 8 years.

(2) A person who has been granted a discharge in a Chapter 13 case filed within the last six years, unless at least 70% of the unsecured claims were paid off in the Chapter 13 case.

(3) A person who files a waiver of discharge that is approved by the court in the Chapter 7 case.

(4) A person who conceals, transfers, or destroys his or her property with the intent to defraud his or her creditors or the trustee in the Chapter 7 case:

(5) A person who conceals, destroys, or falsifies records of his or her financial condition or business transactions.

(6) A person who makes false statements or claims in the Chapter 7 case, or who withholds recorded information from the trustee.

(7) A person who fails to explain in a satisfactory manner any loss or deficiency of his or her assets.

(8) A person who refuses to answer questions or obey orders of the bankruptcy court, either in his or her bankruptcy case or in the bankruptcy case of a relative, business associate, or corporation with which he or she is associated. (9) A person who, after filing the case, fails to complete an instructional course on personal financial management. (10) A person who has been convicted of bankruptcy fraud or who owes a debt arising from a securities law violation. "

What is a Chapter 7 discharge?

"It is a court order that no creditor can attempt to collect any money owed by the debtor on the date that the case is filed. A discharged debt is one that the debtor is released from paying, ever.

Some debts are NOT dischargeable in Chapter 7, and some persons are not eligible for a Chapter 7 discharge. These are listed in answers other FAQs.
"

Who is eligible to file a Chapter 7?

Any person who resides in, does business in, or has property in the United States may file under Chapter 7, except a person who has been involved in another bankruptcy case dismissed within the last 180 days at the person's request, or on certain grounds, such as failure to obey court orders. A person must pass the 'means test,' discussed more fully elsewhere, which generally means that they have to have less than the current Oregon median gross income. Also, the person must have had a telephone, interenet or personal debt counseling session from a non-profit organization within 180 days of filing. Please call me for a current list of providers.

Who should NOT file under Chapter 7?

"A person who doesn't have health insurance, or who has substantial debts not dischargeable under Chapter 7, but files anyway is not only wasting money, but also is giving up the right to file another one for eight years. Please refer to the list of debts not dischargeable in Chpater 7 in these FAQs. People who would not benefit from Chapter 7 should investigate Chapter 13, which has a better discharge, but requires three to five years of best effort payments. If a person has income above the state median or several hundred dollars in excess of living expenses, the court may dismiss their Chapter 7 as being filed in bad faith, and they will have to file a Chapter 13 to get discharged of their debts. Although it is not a legal requirement, as a practical matter, a person's dischargeable debts should exceed the value of his or her non-exempt assets by $1,000 before it is worthwhile to do a Chapter 7. Exempt assets are listed under the button 'Property You May Keep'.

Because a person can only file a Chapter 7 and get discharged once every eight years, a person with no health insurance is taking the risk that they will run up big, unpayable medical debts soon after filing, and the medical creditor will have years to collect from them. People in that fix usually file Chapter 13s.

Also, people who have transferred over $1,000 worth of property to a friend or relative, or paid over $1,000 of their friend or relative's debts within the last 12 months before filing should realize that the trustee can sue the recipient and get a judgment against them for the amount of cash or property transferred or paid on that person's debts.

"

Where do I go to court?

You can file a bankruptcy in a state where you have resided for the majority of the last 180 days, three months and one day. If you live in Deschutes, Crook or Jefferson County, the court sessions are in Bend, and the court where documents are filed is in Portland. If you live in Klamath or Lake County, the court sessions are in Klamath Falls, and sometimes in Medford, and the court where documents are filed is in Eugene. The trap is that the new anti-consumer bankruptcy law has a 730 forum shopping restriction on the state whose exempt property list you use.

For example, I heard that Donald Trump moved to Florida from NYC when his life fell apart, and put his millions into a palatial mansion, proceeded to go bankrupt less than a year later, and kept his fortune because of Florida's unlimited homestead exemption. Under the new law, he would have had to use the unfavorable New York exemptions: Those of the place where he had spent most of the 180 days preceding the 730 days before filing.

May a husband and wife file jointly under Chapter 7?

Yes. If a joint petition is filed, only one set of bankruptcy forms is needed and both debtors get a discharge for the same cost as one debtor.

When should a couple file a joint Chapter 7?

A couple should file if they both owe substantial debts. They do not have to be jointly owed. If both spouses are liable for the same debt, and only one files, the creditor may later attempt to collect the debt from the non-filing spouse, even if he or she has no income or assets. Both husband and wife have to complete the debt management course required for discharge after the case is filed.

What factors should I consider in timing my Chapter 7 filing?

"The answer depends on the status of the debtor's dischargeable debts, the nature and status of the debtor's nonexempt assets, and the actions taken or threatened to be taken by the debtor's creditors. The following rules should be followed:

(1) Don't file under chapter 7 until all anticipated debts have been incurred, because it will be another eight years before the debtor is again eligible for a chapter 7 discharge. For example, a debtor who has incurred substantial medical expenses should not file under chapter 7 until the illness or injury has either been cured or covered by insurance, as it will do little good to discharge, say, $50,000 of medical debts now and then incur another $50,000 in medical debts in the next few months.

(2) Don't file under chapter 7 until the debtor has received all nonexempt assets to which he or she may be entitled. If the debtor is entitled to receive an income tax refund or a similar nonexempt asset in the near future, he or she should not file under chapter 7 until after the refund or asset has been received and spent. Otherwise, the refund or asset will become the property of the trustee.

(3) Don't file under chapter 7 if the debtor expects to acquire property through inheritance, life insurance or divorce in the next 180 days, because unless such property is exempt, it will become the property of the trustee. Property includes the right to receive money more than 180 days in the future. For example, a relative dies just after you file and leaves you an inheritance, the trustee gets the inheritance.

(4) If hostile creditor action threatens a debtor's exempt assets or future income, the case should be filed immediately to take advantage of the automatic stay that accompanies the filing of a chapter 7 case (see the Question on how Chapter 7 affects lawsuits). If a creditor has threatened to attach or seize the debtor's wages or if a foreclosure action has been instituted against the debtor's residence, it may be necessary to file a bankruptcy case immediately in order to keep the creditor from getting the debtor's property.

"

How does filing a bankruptcy case affect lawsuits and foreclosure sales?

The filing of a chapter 7 case instantly stays (or stops) virtually all collection and other legal proceedings pending against the debtor. A few days after a Chapter 7 case is filed, the court mails a notice to all creditors ordering them to refrain from any further action against the debtor. If necessary, this notice may be served earlier by the debtor or the debtor's attorney. Any creditor who intentionally violates the automatic Stay may be held in contempt of court and may be liable to the debtor in damages. Criminal proceedings and actions to collect alimony, maintenance, or support from exempt property or property acquired by the debtor after the Chapter 7 case was filed are not affected by the automatic stay. The creditor has to file a motion with the bankruptcy court to get permission to proceed. However, you need to file before a foreclosure sale to an innocent third party. You have to file a Chapter 13 in order to protect co-signers. Also, the stay only lasts 30 days automatic if you have filed a prior bankruptcy within the last year. Extending it is a contested court proceeding.

Can I file if my debts are being administered by a debt consolidator, or I signed an agreement not to file?

Yes. No one has a legal right to prevent anyone from filing a bankruptcy, and agreements not to file are unenforceable. The US Code says that of itself, filing a bankruptcy is not a breach of any contract, EVEN IF THE CONTRACT SAYS THAT IT IS!

What does filing a bankruptcy do to my credit rating?

"It will usually worsen it, if that is possible. However, some financial institutions such as Capital One openly solicit business from persons who have recently filed under Chapter 7, apparently because it will be at least eight years before they can file another Chapter 7. If there are compelling reasons for filing under Chapter 7 that are not within the debtor's control (such as an illness or an injury), some credit rating agencies may take that into account in rating the debtor's credit after filing. Although bankruptcy is reported for ten years, ordinary bank loans for houses and cars are currently available to those who pay on time for two years. FNMA guaranteed mortgages are currently available to people who pay their bills on time for four years after filing."

Do employers, government agencies and landlords discriminate against people who file bankruptcy?

Landlords often won't rent to people in Chapter 7. However, it is illegal for either private or governmental employers to discriminate against a person as to employment because that person has filed under chapter 7. It is also illegal for local, state, or federal governmental units to discriminate against a person as to the granting of licenses (including a driver's license), permits. and similar grants because that person has filed under Chapter 7. People who have driver's licenses suspended for failure to pay fines or other obligations can get them back by filing a Chapter 13 plan which proposes to pay the fine or obligation over three to five years in installments.

How are secured creditors treated in Chapter 7?

Secured creditors are creditors with valid mortgages or liens against property of the debtor. Property of the debtor that is encumbered by a valid mortgage or lien is called secured property. A secured creditor is usually permitted to repossess or foreclose on its secured property, unless the payments are current or the value of the secured property exceeds the amount owed to the creditor. A secured creditor must prove the validity of its mortgage or lien and obtain a court order before repossessing or foreclosing on secured property. The debtor should not turn any property over to a secured creditor until a court order has been obtained. The debtor may be permitted to retain or redeem certain secured personal property. Please refer to the question on redemption. If the payments are current, the debtor may sign up for the debt all over again (reaffirm it) in order to keep the collateral. This choice must be made and performed within 30 days after the meeting with the Chapter 7 Trustee which is required in every case. A debtor with a vehicle worth several thousand dollars less than what is owed on it which was bought over 2 1/2 years ago, who wants to keep the vehicle, should read the FAQs on Chapter 13.

How are Unsecured creditors treated in Chapter 7 cases?

An unsecured creditor is a creditor without a valid lien or mortgage against property of the debtor. If the debtor has nonexempt assets, unsecured creditors may file claims with the court within 90 days after the first date set for the meeting of creditors. The trustee will examine these claims and file objections to those deemed improper. When the trustee has collected all of the debtor’s nonexempt property and converted it to cash, and when the court has ruled on the trustee's objections, the trustee will distribute the funds (i.e., pay dividends) to the unsecured creditors according to the priorities set forth in the Bankruptcy Code. Domestic support obligations, administrative expenses, claims for wages, salaries, and contributions to employee benefit plans, claims for the refund of certain deposits, and tax claims, are given priority, in that order, in the payment of dividends by the trustee. If there are funds remaining after the payment of these priority claims, they are distributed pro rata to the remaining unsecured creditors. In most consumer cases, there are no assets for the trustee to distribute, and unsecured creditors get nothing.

What secured property may an Oregon debtor REDEEM in a Chapter 7?

A couple may retain and redeem certain secured personal and household possessions, such as household furniture, appliances and goods worth up to $3,000. Each debtor may retain tools used in his or her trade or business worth up to $3,000, plus clothing, furs, personal effects, sporting goods and jewelry worth up to $1,800, all without payment to the secured creditor if the property was mortgaged to the creditor after the debtor already owned the property outright. This rule does not work if the debtor gave the creditor a security interest in the property for the purpose of buying it and payment of the purchase price of the property has never been completed. A debtor may also retain and redeem without payment to the secured creditor any secured property that is both exempt and subject only to a judgment lien or Oregon tax lien. This doesn't work if it is a domestic relations judgment. Finally, a debtor may redeem exempt property by paying the secured creditor an amount equal to the used value of the property, no matter how much is owed to the creditor. You have to file a motion in the court within 30 days of meeting with the trustee to remove the creditor's interest, so if you want to redeem property, call your attorney right away.

How can I minimize the money or property (if any) that I lose to creditors?

"In a Chapter 7 case, the debtor is required to turn over to the trustee only the nonexempt money or property that he or she possessed on the day the case was filed. Many nonexempt assets of consumer debtors vary in size and amount from day to day. It is wise therefore, for the debtor to do some planning so as to minimize the value or amount of these liquid assets on the day and hour that the Chapter 7 case is filed. The most common liquid assets, and the assets the trustee will be most likely to look for, include:

(1) cash
(2) bank accounts
(3) prepaid rent
(4) Landlord and utility deposits
(5) take home pay, sick leave pay and vacation pay you would have gotten if you had quit on the day you filed your case
(6) tax refunds
(7) sporting goods

Negative estate planning, and what, if anything, you would lose in bankruptcy is discussed in the initial conference with your attorney. A list of property you can keep in bankruptcy is available on request. If your case is to be filed in Oregon, a total of $400 per debtor of the six types of liquid assets is exempt. Therefore, you should reduce the amount of these liquid items below a total of $400 (or $800 if a couple is filing together). If this is impossible, please call me to discuss the problem of non-exempt assets. Since the trustee does not have to administer amounts under $1,000, if all your other assets are exempt, you could keep up to $1,400 (or $1,800 if a couple) in liquid assets. The rest of the material on this question 29 tells what to do if your total of liquid assets exceeds the exempt limits. Each type of liquid asset is identified with an asterisk (*).

Cash.* If the debtor has received cash or a paycheck, or has closed a bank account shortly before filing the case, the debtor should keep receipts when the funds are spent in order to prove to the trustee and the bankruptcy judge that the funds were in fact spent before the case was filed. Money possessed by the debtor shortly before filing the Chapter 7 case should be spent on groceries, the Chapter 7 filing fee, the attorney's fee in the Chapter 7 case, and payment of up to $1,000 to creditors whom the debtor need to continue to do business with and continue paying after the filing of the Chapter 7 case. (Example: the orthodontist if your children wear braces.) Payments on pre-existing debts should not be made to friends, business associates, or relatives, however, since the trustee may recover judgments against them in the amount of these payments if the total of your non-exempt assets (counting these payments) exceeds $1,000.

Bank Accounts.* The best practice is to let all your checks clear and close out all bank accounts before filing Chapter 7, unless the total of your liquid assets is under $400 ($800 in the case of a couple) and the total of all your non- exempt assets is less than $1,000. For purposes of figuring your total non-exempt assets, include any payments totaling over $1,000 on a pre-existing debt made to any one creditor during the 90 days before you filed your case. Normal monthly payments on an installment purchase do not count. If you paid a friend, business associate or relative more than $1,000 on a pre-existing debt up to one year before you filed the case, the trustee may recover judgment against them for the full amount received from you during the year, so you should discuss this sort of situation with your attorney."

Will my utility suppliers cut off my service if I go bankrupt on their bill?

"If, within 20 days after a Chapter 7 case is filed, the debtor furnishes a utility company with a deposit or other security to insure the payment for future utility services, it is illegal for a utility company to refuse to provide future utility service to the debtor, or otherwise to discriminate against the debtor, as a means of pressuring the debtor to pay its bill for past utility services discharged in the Chapter 7 case. Utility companies usually require a new deposit of one or two months' average bill, or what they would charge a new customer."

How do my creditors and I know when I am discharged from my debts permanently?

The court sends out a form called 'Discharge of Debtor' to the debtor and all creditors. This form is a copy of the court order discharging the debtor from his or her dischargeable debts,and it serves as a notice that the debtor's discharge has been granted. It is usually mailed about two months after the first meeting of creditors if there are no assets that the debtor has to turn over to the trustee.

How would bankruptcy affect co-signers and other parties who may be jointly liable on my discharged debts?

A Chapter 7 releases only the debtor. The liability of guarantors and co-signors is not affected by a Chapter 7 discharge, except in community property states. Oregon is not one of them. If a debtor wants to protect a co-signor from a certain creditor, he or she can file a Chapter 13 plan under which they pay only that creditor in full.

In Chapter 7, do I get to keep my home and other things I am buying on the installment plan?

"Yes, if your payments are current at the time you file your case AND YOU SIGN UP FOR THE BALANCE OF THE DEBT ALL OVER AGAIN (REAFFIRM IT). If you don't sign up all over again, and the creditor graciously lets you keep the property anyway, should you later default, the creditor may repossess the property and resell it, but you will not be liable for the difference between the unpaid balance of the debt and the proceeds of resale if you are discharged in bankruptcy. If you are in arrears on such debt, you can make the creditor a cash offer of the present value of the item, and keep it if you pay the amount agreed to by the creditor within 30 days after the meeting with the trustee. This process is called redemption.

If the creditor and you do not agree on a redemption price, or if you cannot afford to redeem an item you want to keep, and if you owe more for the property than it is now worth, you should talk to your attorney about filing a Chapter 13 case, so that you can catch up on the installments over three to five years, then change your plan and let it go back when you are done with it. If you bought a vehicle over 930 days ago (about 2 1/2 years) or anything else over a year ago, and its value is at least $3,000 less than you owe, in Chapter 13, you can pay what it is worth rather than what you owe, and get the title if and when you are discharged in Chapter 13. Please refer to the Chapter 13 FAQs.

WARNING: Secured creditors can repossess the collateral if the payments go into arrears at any time. Therefore, you need to keep the payments current in order to keep the collateral even if the creditor has ceased to send bills for installment payments on its secured debt. Sometimes predatory creditors create an artificial default by refusing to cash payment checks in hopes of putting the debtor to the choice of reaffirming or suffering immediate repossession. Therefore, it is advisable to make payments in person and get receipts or to send payments by certified mail, return receipt requested until the discharge in bankruptcy. If you know that payments on something you want to keep will not be current at the time you file your Chapter 7 case, you should call me promptly about doing a Chapter 13 instead. If your payment includes taxes and the mortgage holder refuses to send you any more statements, you need to make a written request for the amount of the monthly payment each November, so that they cannot create an artificial default if property taxes go up. An alternative is to start paying the taxes yourself directly and sending a receipt to the lender. After filing, you will need to make written requests for coupon books and statements of account, or you won't get them. Also, there will be no more grace periods, so try to get one payment ahead."

What if I have judgments against me? Will I have to pay them if I am discharged?

"If you are discharged, judgments cannot be collected from your personal property or your earnings. However, if you have a judgment against you in Circuit Court, and you had a fee title to real estate at the time the judgment was entered in the docket, the judgment becomes a lien on that real estate. The lien will exist as long as the judgment remains on the docket. The judgment remains in force for 10 years after it is put on the docket, and can be renewed for an additional ten years. The judgment lien does not attach to your interest in real estate that you are buying on a land sale contract, only to real estate to which you had a recorded deed at the time the judgment was docketed. District Court judgments can be re-docketed in Circuit Court, and usually are. Circuit Court judgments create two problems:

First, if you want to sell the real estate you owned at the time the judgment was docketed, you cannot give the buyer marketable title without paying off the judgment. Just going bankrupt does not help this problem unless the real estate is your residence at time you file the case. If the real estate was your home at the time you filed your case, you should tell your attorney to file a motion in the bankruptcy case under 11 USC § 522(f)(1) to have the judgment removed to the extent that it impairs your homestead exemption in your home equity. This exemption is $39,600 for couples and $30,000 for singles.

Here are some examples of how these rules work:

a. If your home is in the name of husband and wife, and is worth $100,000 at the time you file your case, you have a deed to it, and you have given a mortgage or trust deed back to a lender for $60,400, you can make the title to the home marketable by paying your attorney extra to do the § 522(f)(1) motion.

b. If you and your spous only owe $50,000 on your $100,000 deeded home, however, and the judgment is $200,000, you would have to pay $10,400 on the judgment during your Chapter 7. When that was paid, you could get the judgment removed by the same type of motion. If you didn't pay, the trustee would sell your home, pay you $39,600 and pay the rest of the proceeds to your creditors. However, he would not do this if he thought that the costs of sale and taxes on capital gains would leave l3ww than $1,000 to pay your creditors.

c. If you owed $50,000 on a $100,000 home financed by a land sale contract, however, you would be in the same situation as in b., but you would not have to hire your attorney to do the § 522(f)(1) motion, because the judgment lien would not attach to the title to your home anyway.

d. If you own investment real estate that is not your home, and have a deed to it, there is nothing you can do if you have equity in it. The title remains unmarketable until the judgment expires, or is satisfied. You can satisfy it by getting it discharged from the record in a separate proceeding under ORS 18.420 ONLY IF you can prove that what you owed on it at the time the bankruptcy petition was filed was equal to or greater than its value at that time.

The second problem from Circuit Court judgments arises this way: Assume that you do not have the deed to any real estate, but have a Circuit Court judgment against you. That judgment attaches to your name, and if you ever get deeded title to any real estate in the future, normally that judgment would attach to the after- acquired real estate. Fortunately, ORS 18.350 provides that judgments against you before you file a bankruptcy, do NOT attach to real estate that you acquire after you are discharged."

When is a Chapter 13 preferable to Chapter 7 for a debtor?

Chapter 13 is usually preferable for a person who (1) wishes to repay all or most of his or her unsecured debts and has the income to do so within three years, (2) has valuable non-exempt property or has valuable exempt property securing debts that are in default, either of which would be lost in a Chapter 7 case, (3) is not eligible for a Chapter 7 discharge, (4) has one or more large debts that are dischargeable under Chapter 13 but not under Chapter 7, (5) has a vehicle purchased over 930 days (about 2 1/2 years ago or something else purchased over a year ago worth several thousand dollars less than what is owed on it, or (6) has sufficient income with which to repay most debts, but needs temporary relief from creditor lawsuits in order to do so. If you have more than state median income, the new bankruptcy law forces you to do a five year Chapter 13 rather than a Chapter 7 unless you can get a special court order making an exception.

What are the key questions I should ask myself in deciding between Chapter 7 and Chapter 13?

"1. Do I owe the IRS or Department of Revenue more than I can pay them in 18 months? AND are these taxes for years for which the return was first due less than three years ago, or years or which I have not filed a return over two years ago?

2. Am I behind on house or car payments?

3. Do I have a vehicle or something else for which I owe several thousand dollars more than it is worth?

A 'yes' on any of these questions means that you would probably be better off in Chapter 13, and should study the answers to frequently asked questions about it."

How would a Chapter 13 have a different effect on me than a Chapter 7?

The basic difference between Chapter 7 and Chapter 13 is that under Chapter 7 the debtor's non-exempt property (if any exists) is liquidated to pay as much as possible of the debtor's debts, while under Chapter 13, a portion of the debtor's future income for three to five years is used to pay as much of the debtor's debts as is feasible considering the debtor's circumstances. As a practical matter, under Chapter 7, the debtor loses all or most of his or her non-exempt property and receives a Chapter 7 discharge, which releases the debtor from liability for most debts. Under Chapter 13, the debtor usually retains his or her non-exempt property, must pay at least the value of the non-exempt property being kept, or his or her 'disposable income' for three years, whichever is more, but does not have to pay all of his debts. The percentage of debts paid, pro rata, is the debtor's non-exempt property value divided by the amount of his unsecured debts. The trustee gets copies of the debtor's in come tax returns annually from the debtor as a condition of continuing the plan, and monitors these to see whether the debtor can pay more than the minimum needed to keep his or her property, adding any refunds to the amount the debtor must pay in order to get a discharge. At the end of the payments required by the confirmed plan, the trustee requests, and the court gives, a Chapter 13 discharge. This releases the debtor from liability for many kinds of debts not dischargeable in Chapter 7, most importantly, taxes, fines and debt for vehicles worth thousands less than what is owed on them which were bought over 930 days (about 2 1/2 years) before filing. However, a Chapter 7 only lasts three months rather than three to five years, and in Chapter 13, the debtor pays further attorney fees, and a trustee's commission through the plan payments.

Would I be better off using a debt consolidation service than doing a Chapter 13?

In a Chapter 13 case, the bankruptcy court gives the debtor help that a debt consolidation service cannot provide. For example, the court prohibits creditors from attaching or foreclosing on the debtor's property. It can force unsecured creditors to accept a Chapter 13 plan that pays none of their claims, but only taxes and secured debt, and discharge the debtor permanently from the unpaid balance. It can force an auto lender to accept the present appraised value of the vehicle as full payment, rather than the amount of the debt, and give the debtor the title when that lesser amount is paid. The new anti-consumer bankruptcy law limits this to cars bought 930 days (about 2 1/2 years) before filing. Private debt consolidation services have none of these powers.

What is Chapter 13 and how does it work?

Chapter 13 is that part (or chapter)of the Bankruptcy Code that allows a person to repay all or a portion of his or her debts under the supervision and protection of the bankruptcy court. The Bankruptcy Code is that portion of the federal laws that deal with bankruptcy. A person who files under Chapter 13 is called a debtor. In a Chapter 13 case, the debtor must submit a plan to the court for repayment of all or a portion of his or her debts. The plan must be approved by the court (confirmed) in order to become effective. If the court approves the debtor's plan, most creditors will be prohibited from collecting their claims from the debtor during the course of the case. The debtor must make regular payments to a person called the Chapter 13 trustee, who collects the money paid by the debtor and disburses it to creditors in the manner set forth in the plan. Upon completion of the payments called for in the plan, the debtor is discharged from liability for the unpaid portion of his or her debts, with exceptions such as student loans and domestic relations judgments.

Why is a Chapter 13 discharge better than a Chapter 7 discharge?

"A full chapter 13 discharge granted upon the completion of all payments required in the plan discharges a debtor from all debts except:
(1) debts that were paid outside of the plan and not covered in the plan, the last payment being due after the case is over OR THAT YOU OMIT TO LIST ON THE DOCUMENTS FILED WITH THE COURT, INCLUDING SURETY AND CONSTRUCTION BONDS ON WHICH A CREDITOR MAY LATER MAKE A CLAIM.
(2) debts for alimony, maintenance, or support,
(3) debts for death or personal injury caused by the debtor's operation of a motor vehicle, boat or plane while intoxicated,
(4) debts for restitution included in a criminal sentence imposed on the debtor,
(5) debts for student loans guaranteed by a non-profit organization or a governmental unit, unless the debtor files a separate action within the bankruptcy case to show that paying them would cause an undue hardship.
(6) installment debts whose last payment is due after the completion of the plan, but the creditor's only remedy is to foreclose on or re-possess the collateral (they can't sue on the debt after the debtor is discharged), and
(7) debts incurred while the plan was in effect that were not paid under the plan. (8) debts incurred by fraud, theft or embezzlement. For comparison, click on the question about what debts are not discharged in Chapter 7. This is a much more extensive list, including recent income taxes. If a Chapter 13 fails, it is possible to get a 'hardship' discharge that is no more extensive than a Chapter 7 discharge. Debtors seek this kind of discharge when they had to file a Chapter 13 within eight years of filing a Chpater 7."

How can I get rid of debts that are not dischargeable in Chapter 13 OR Chapter 7?

You can pay them off in installments during the last two years of a five year Chapter 13, using the protection from lawsuits and seizures of property that goes with being in Chapter 13. This is also a useful way of protecting friends and relatives who have co-signed your debts.

What is a Chapter 13 plan?

It is a written plan presented to the bankruptcy court by a debtor that states how much money or other property the debtor will pay to the chapter 13 trustee, how long the debtor's payments to the chapter 13 trustee will continue, how much will be paid to each of the debtor's creditors, which creditors will be paid outside of the plan, and numerous restrictions on your economic activity imposed by court rules.

What is a Chapter 13 trustee?

A chapter 13 trustee is a person appointed by the United States trustee to collect payments from the debtor, make payments to creditors in the manner set forth in the debtor's plan, and administer the debtor's chapter 13 case until it is closed. In some cases the chapter 13 trustee is required to perform certain other duties, like recovering fraudulent conveyances and preferential payments made by the debtor before filing. The debtor is always required to cooperate with the chapter 13 trustee. Discharge can be denied for refusing to answer the trustee's questions that affect what the creditors get. The trustee is also in charge of moving to dismiss the case or to convert it to Chapter 7 if the debtor defaults on plan payments, transfers real estate without prior court approval, or otherwise violates court orders.

Do I have to pay all my debts in full under a Chapter 13 plan?

No. While certain debts, such as debts for recent taxes and fully secured debts, must be brought current under a Chapter 13 plan, only an amount that the debtor can reasonably afford must be paid on most debts. The unpaid balance of most debts that are not paid in full under a Chapter 13 plan is discharged upon completion of the plan. With competent legal advice, you can usually minimize payments to unsecured creditors to what (if anything) they would have gotten in a Chapter 7. You can keep property worth less than what you owe on it by paying what it is worth at the time the case is filed. This 'cramdown' feature helps people keep cars that they bought over 930 days (about 2 1/2 years) ago which they otherwise would have lost to repossession when they cannot pay the loan as agreed. Junior mortgages and trust deeds on a debtor's home that are 'clear out of the money' in that prior liens total more than the home's value can also be removed by a separate proceeding within the bankruptcy case.

Do I have to treat all unsecured debts alike in my Chapter 13 plan?

No. Some unsecured debts can be separately classified to be paid in full, while paying little or nothing on others. For example, the plan can provide for paying unsecured debts pro rata for the first three years, and the next two years pay only on non-dischargeable student loans and loans that are co-signed by friends and relatives. If the plan provides for paying a guaranteed debt in full, the non-filing co-signer cannot be sued during the Chapter 13 if the debtor is paying the trustee in accordance with the plan.

How much of my income would I have to pay to the Chapter 13 trustee?

"Usually, all of the disposable income of the debtor and the debtor's spouse for the first three years of the plan must be paid to the Chapter 13 trustee. Disposable income is take home pay or net profit received by the debtor and his or her spouse that is not reasonably necessary for the support of the debtor and the debtor's dependents. It also includes tax refunds received during the first three years, so the Chapter 13 debtor should arrange tax witholdings to avoid getting any. However, the trustee cannot get the federal earned income credit. If the debtor has more than the state median income for a family of the same size, he or she has to stay in Chapter 13 for five years."

How soon after I file a Chapter 13 would I have to start paying the trustee?

The debtor must begin making payments to the chapter 13 trustee within 30 days after the debtor's plan is filed with the court, and the plan must be filed with the court within 15 days after the case is filed. The payments must be made regularly, usually on monthly basis. If the debtor is employed, some courts require the payments to be made by the debtor's employer; otherwise, the payments can be made by the debtor. Unfortunately, the trustee does not take personal checks or electronic transfers, so if an employer is not paying the trustee, the debtor has to buy a money order or cashier's check for every one of the payments required by the plan.

Do the creditors get to vote on my Chapter 13 plan, as they do in Chapter 11?

No. To become effective, a chapter 13 plan must be approved by the court, not by the creditors. The court, however, cannot approve a plan unless secured creditors are dealt with in the manner described in the answer to the next question. Also, unsecured creditors are permitted to file objections to the debtor's plan, and these objections must be ruled on by the court before it can approve the debtor's chapter 13 plan. Objections are usually disputes as to value of collateral or amount of arrearage to be paid under the plan.

How are SECURED creditors treated in a Chapter 13 plan?

There are four methods of dealing with secured creditors under a Chapter 13 plan: (1) the creditor may accept the debtor's proposed plan, (2) the creditor may retain its lien and be paid the full amount of its secured claim (the retail value of the collateral or the loan balance, whichever is less), (3) the debtor may surrender the collateral to the creditor, or (4) the creditor may be paid or dealt with outside the plan. It is important to understand that a secured claim cannot exceed the value of the property securing the claim. Thus, an undersecured creditor, owed $10,000 on, say, a $7,500 automobile, cannot have a secured claim for more than $7,500, regardless of how much is owed to the creditor if the financed car was purchased over 930 days (about 2 1/2 years) before the case is filed. If the debtor is in default to a fully secured creditor, the default must be cured (made current) within a reasonable time. Also, interest must be paid on fully secured claims if interest is payable under the terms of the contract. Contracts for the debtor's principal residence can't be modified, except that an arrearage in payments can be paid under the plan, usually without interest on the arrearage. If the first mortgage has a balance greater than the value of the home, the lien of a second mortgage that is 'clear out of the money' can be removed from the home by court order without payment of the loan. This requires a separate 'adversary proceeding' within the bankruptcy case.

If grandma co-signed on my VISA card, how can I keep her from being sued if I go bankrupt?

If a co-signed or guaranteed consumer debt is being paid in full under a chapter 13 plan, the creditor may not collect the debt from the co-signor or guarantor. However, if a consumer debt is not being paid in full under the plan, the creditor may collect the unpaid portion of the debt from the cosigner or guarantor. A consumer debt is a nonbusiness debt. Creditor may collect business debts from co-signors or guarantors even if the debts are to be paid in full under the debtor's plan, but they cannot legally be paid twice.

Are there limits to the amount of debt I can discharge in bankruptcy?

There are no limits to the amount of debt dischargeable in Chapters 7 and 11. However, no one can file a Chapter 13 as of April 1, 2004 who has secured debt over $922,975 or unsecured debt over $307,675. These limits will be adjusted for inflation on March 31, 2007. Family farmers who owe over $3,237,000 have to do Chapter 11s, being considered too 'big-time' to get the more favorable treatment of a Chapter 12.

If I default on my mortgage payments after filing a Chapter 13, can I dismiss and re-file to stop foreclosure?

A person cannot file a second Chapter 13 for 180 days if the trust deed or mortgage holder moved for relief from stay on account of the default, and the debtor responded by exercising his right to dismiss the case. This rule intended to give the home lender enough time to foreclose without being thwarted by repeated bankruptcy filings. However, if the trustee got the Chapter 13 dismissed because the debtor was not paying him, this rule would not apply, and the debtor could re-file within the 180 days. However, if the debtor files a third time, the court always holds an evidentiary hearing on whether the debtor's finances have improved since the second case, and dismisses the case with a 180 day bar to re-filing if it decides that the debtor is just stalling. Under the new anti-consumer bankruptcy law, lenders can get orders in the first case that give them two years to foreclose on the ground that the Chapter 13 was filed in bad faith. These orders put the burden on the debtor to prove an improvement in ability to pay when filing the later case.

If both spouses work and only one files a Chapter 13, is the plan payment based on their combined income?

Yes. Even worse, if an unemployed non-filing spouse gets a job during the plan, the trustee will get a copy of their joint tax return every year and give the debtor the choice of raising payments or having the Chapter 13 dismissed.

If I discover that I made a mistake filing a Chapter 7, can I convert it to a Chapter 13?

A pending Chapter 7 case may be converted to Chapter 13 at any time at the request of the debtor, if the case has not previously been converted to Chapter 7 from Chapter 13. This may be done in response to an adversary proceeding filed by a creditor who claims to have been defrauded.

What fees are charged in a Chapter 13 case?

"There is a $274 filing fee charged when the case is filed. In addition, the Chapter 13 trustee assesses a fee ranging from 2 to 10 percent on all payments made under the plan. Thus, if a debtor pays a total of $5,000 to creditors under a Chapter 13 plan, and the trustee's fee is 10%, the court and trustee fees charged in the case will be a $555.56 trustee's fee plus the $274 filing fee.

These fees are in addition to the portion of the fee charged by the debtor's attorney which is paid through the plan. Please click on the button 'Bankruptcy Worksheet' to see our usual fee agreement. Currently, we are charging $2,500, court-prescribed included in the payments to the trustee over the three to five years that the plan lasts. We're willing to negotiate on up front fees, which reduce the $2,500 paid through the plan and so eliminate the trustee's commission on it."

Will my employer be notified if I file a Chapter 13?

In most cases, yes. Many courts require a debtor's employer to make payments to the chapter 13 trustee on the debtor's behalf. Also, the chapter 13 trustee may contact an employer to verify the debtor's income. However, if there are compelling reasons for not informing an employer in a particular case, it may be possible to make other arrangements for the required information and payments.

Can I legally be fired just because my employer has to make payments to the Chapter 13 trustee?

No. It is illegal for either private or governmental employers to discriminate against a person as to employment, or for governmental agencies to discriminate against a person as to the granting of licenses, permits, and similar grants because that person has filed under chapter 13.

What do I do if the court won't approve my Chapter 13 plan?

"If the court will not approve the plan proposed by a debtor, the debtor may modify the plan and seek court approval of the modified plan. If the court does not approve a plan, it will usually give its reasons for refusing to do so, and the plan may then be appropriately modified so as become acceptable to the court. A debtor who does not wish to modify a proposed plan may either convert the case to chapter 7 or dismiss the case.

The court may confirm a chapter 13 plan if: (1) the plan complies with the legal requirements of Chapter 13, (2) all required fees, charges and deposits have been paid, (3) the plan was proposed in good faith, (4) each unsecured creditor will receive under the plan at least as much as it would have received had the debtor filed under chapter 7, (5) it appears that the debtor will be able to make the required payments and comply with the plan. "

What would I do if I were temporarily unable to make Chapter 13 plan payments?

If the debtor is temporarily out of work, injured, or otherwise unable to make the payments required under a Chapter 13 plan, the plan can usually be modified so as to enable the debtor to resume the payments when he or she is able to do so. If it appears that the debtor's inability to make the required payments will continue indefinitely or for an extended period, the case may be dismissed or converted to Chapter 7. If the plan is nearly completed, and the creditors have received at least what they would have received in a Chapter 7, the Chapter 13 debtor can apply for a 'hardship' discharge.

What would I do if my car broke and I needed to borrow money during my Chapter 13?

Only two types of credit obligations or debts incurred after the filing of the case may be included in a chapter 13 plan. These are: (1) debts for taxes that become payable while the case is pending, and (2) consumer debts arising after the filing of the case that are for property or services necessary for the debtor's performance under the plan and that are approved in advance by the chapter 13 trustee. All other debts or credit obligations incurred after the case is filed must be paid by the debtor outside the plan. Oregon bankruptcy judges issue an order prohibiting the debtor from incurring new debts during the case unless they are approved in advance by the chapter 13 trustee. Therefore, the approval of the chapter 13 trustee should be obtained before incurring credit or new debts after the case has been filed. Incurring regular debts, such as debts for living expenses, like medical care, telephone service and utilities, does not require the trustee's approval. Also, self employed people submit a budget to the trustee before their plan is confirmed, and can borrow in the ordinary course of business as indicated in the budget without further approval by the trustee or the court.

What if I change my mind, and don't want to continue in a Chapter 13 case?

The debtor has the right to either dismiss a chapter 13 case or convert it to chapter 7 at any time for any reason. However, if the debtor simply stops making the required chapter 13 payments, the court may compel the debtor or the debtor's employer to make the payments and to comply with the orders of the court. Therefore, the debtor who wishes to discontinue a chapter 13 case should do so through his or her attorney.

If I can't complete my Chapter 13 payments, what should I do?

A debtor who is unable to complete the chapter 13 payments has three options: (1) dismiss the chapter 13 case, (2) convert the chapter 13 case to chapter 7, or (3) if the debtor is unable to complete the payments due to circumstances for which he or she should not be held accountable, close the case and obtain a partial chapter 13 discharge which is like a Chapter 7 discharge as to the types of debts not discharged, but can be obtained less than six years after a prior Chapter 7 is filed. This 'hardship' discharge procedure discharges some debts that are not discharged in Chapter 7, but unlike conversion to Chapter 7, does not allow adding debts that were run up after the chapter 13 case was filed and before the conversion.

Other than non-payment what are the main things that can go wrong in Chapter 13?

"During the first three years, if your plan does not provide for paying all your debts in full with 9% interest, the trustee tries to find out whether your disposable income has gone up. If it goes up, he will propose a new plan with higher monthly payments so that all your disposable income is paid to your creditors.There are several legally protected ways he has to get this information: (1) Your plan will require you to send him copies of your income tax returns each April during the entire duration of the plan, even if it exceeds three years. (2) The court order confirming your plan will require you to notify the trustee in writing if your gross INCOME INCREASES more than 10% above what is stated in your budget filed with the plan. If you become eligible to RECEIVE OVER $2,500 by gift, inheritance, bonus, personal injury settlement or otherwise, you have to report this to the trustee immediately. Also, when you get the money, you cannot spend it. You have to get a court order or the written permission of the trustee.

While you are in Chapter 13, you are PROHIBITED FROM BUYING, SELLING, using up, leasing,renting out, borrowing money against, or otherwise disposing of ANY of your real estate, and your other property worth $10,000 or more. You need a court order in order to do this. All the creditors are notified, and if they object, the judge will hold a hearing and decide whether you can do the transaction.

If you are IN BUSINESS, you have to open a separate bank account and put your monthly employee withholding taxes and all employer payroll taxes in it. It is unlawful to pay anything else out of this account. You also have to send the trustee a quarterly profit and loss statement. Your attorney will give you a form for this on request.

If the CLAIMS that are being paid under your plan come in MORE THAN YOU THOUGHT when you filed, you have to file a new plan with increased payments sufficient to pay off these claims within five years of the first payment under the plan. Ordinary creditors have 90 days after our first meeting with the trustee to file their claims and taxing authorities have six months. YOUR PLAN HAS TO PAY RECENT TAX CLAIMS IN FULL. If they payments are insufficient to do this, the trustee will send you a bill for the unpaid balance about six months before your time runs out. If you cannot pay this bill, your case will be dis-missed,and all your debts will again be owing with interest to date added, but reduced by the amount that the trustee paid the creditors during the plan. The trustee does not send you a list of the claims that have been filed, so you have to CALL YOUR ATTORNEY OR WRITE THE COURT for this information shortly after the six months is up to make sure that you are paying enough into your plan to get a discharge.

If your plan provides for SURRENDERING property to lienholders or SELLING OFF property and paying the proceeds to the trustee, and you do not do so as stated in your plan confirmed by the court, the trustee can get your case dismissed for failure to meet a deadline."

When can I lose my property unexpectedly in Chapter 13, and what can I do to prevent it?

"If you have a tax lien against you or are buying property on the installment plan and list it under your plan for payment through the trustee, and the SECURED CREDITOR, who has the right to repossess or foreclose for non-payment, FAILS TO FILE A PROOF OF CLAIM within the deadline, the trustee will take the money you dedicated in your plan to pay this creditor and pay it to other general creditors who cannot repossess anything. Then, when your plan is over, the creditor will no longer be restrained by the bankruptcy court and will foreclose or repossess the collateral. You can prevent this problem by getting a list of claims filed three months after your plan begins. You can do this by writing to the court, or paying your attorney to get the information for you off the court's computer database. Your attorney will try to get the creditor to send him a proof of claim and move the court to allow it although it is late. This motion has to be filed within four months after your plan begins.

If you are LEASING property you are using, and your plan does not provide for ASSUMPTION of the lease, the lessor can get the property back during the Chapter 13 on request. This could be a home, business premises, vehicles or equipment you use in business. Prevent what could be catastrophic loss by giving your attorney copies of all leases with your worksheets and marking on them 'ASSUME IN PLAN.'"

I am behind on my house payments and facing foreclosure. Can Chapter 13 help me?

"Yes, if you can resume the monthly payments the month after you file your case. In most cases, you can resume the payments and pay off the arrearage without interest on the arrearage over three to five years. If you have a mortgage that comes due during the next five years, and don't want to sell or refinance during that period, the Chapter 13 will extend the period for paying off the mortgage to the end of the plan, which may be as long as five years from the time you file.

However, it is more expensive to pay an arrearage through the Chapter 13 trustee than directly, because the trustee charges a 2 to 10% commission on the amount you pay him on the arrearage and on attorney fees you pay through the plan. Therefore, if you had a $10,000 arrearage and $755 in attorney fees unpaid, over the five years, it would cost you $10,755/.9= $11,950 to cure the arrearage through a Chapter 13. The extra $1,950 is worth it when you consider the cost of moving and losing your equity.

If you cannot afford to resume the monthly payments after you file your case, it is possible to get a plan confirmed that pays monthly interest only on the loan, and in which you put the house up for sale, and sell it by a deadline set in the plan. That deadline may be nine to eighteen months after you file the plan depending on the type of property you have, and what a typical, reasonable period to sell that type of property is. If you don't make the deadline, the lender then can get relief from stay and proceed with foreclosure. The time required for the typical trust deed foreclosure is not less than four and a half months, and may run longer. You don't have to vacate the property until 10 days after the foreclosure sale, and oftentimes the lender will let you rent for awhile in order to avoid the extra fire insurance charges on vacant property. Whether you can rent from the lender depends on the lender's opinion of how well you keep the place up, and whether your occupancy will interfere with re-sale. However, if the lender has published a notice of a foreclosure sale before you filed a Chapter 13 to stop it, and your Chapter 13 is dismissed, the sale can be rescheduled 30 days in the future. The lender does not have to wait out the four months again."

I have a car worth thousands of dollars less than I owe on it. Can Chapter 13 help me?

"Yes, but only if you bought the financed vehicle for non-business use over 930 days (about 2 1/2 years) before filing the case. The look-back period doesn't apply to vehicles bought exclusively for business. You can have the car appraised at retail, and pay the lower appraised value. When you pay this with interest at the contractual rate, or a reasonable rate if the contractual rate is over 14%, you can force the lender to transfer title to you. The limitation is that you have to pay the car off within the five year limit for Chapter 13 plans. Lenders often the dispute your appraisal, so it must be done by a used car dealer who is willing to testify in the US Bankruptcy Court. The main court is in Portland, but the judge comes here on circuit most months to hear valuation cases.

The Kelly Blue Book website, kbb.com, is not a very reliable source of retail information, since it does not take into account the condition of your car or the local market. This value is usually higher than one you can get from a local dealer, but the lenders will demand the KBB value. In Chapter 13 there is no realistic alternative to getting a local dealer appraisal, since you are paying interest on the appraised value, plus a 2 to 10% trustee's commission on the payments and the interest. For example, if you were paying off a car with an appraised retail value of $10,000 through a Chapter 13 plan, and the contractual interest rate were 12% APR, the cost of paying off the car over five years would be $14,826 versus $13,347, a difference of $1,479 if you were just paying interest. If you had no other reason for filing the case, adding the filing fees, attorney fees and the trustee's commission on attorney fees paid through the plan, this cost increases by $1,519. As you can see, using a Chapter 13 to reduce your car payments is only profitable if it is worth several thousand dollars less than you owe."

What does filing a Chapter 13 do to my credit?

"Most lenders will deal with you on a normal basis if you pay your debts faithfully for two years after you are discharged in bankruptcy. The Federal National Mortgage Administration, a guarantor of home loans recently began refusing to guarantee loans to those who had been in bankruptcy within the last four years. You are in bankruptcy for three to five years in Chapter 13, and your credit doesn't return to normal for your income for two years after you are discharged or the case is dismissed. Bankruptcy is reported on your credit report for 10 years after filing, and the debts that you don't pay still show as unpaid. However, you cannot be successfully sued for them if you are discharged. Sometimes people want to pay one credit card down to zero before filing so that they can 'keep it.' If you pay a creditor over $1,000 above normal monthly payments within 90 days before you file your case, the trustee can sue to get the preferential payment back, and pay your creditors pro rata with the proceeds. That creditor will then have a unpaid claim, and may cancel your card anyway. You or your attorney should write to the card issuer and ask about their policies on immediate cancellation and non-renewal. With the current housing price bubble, many home lenders are making loans to people in Chapter 13, which they use to pay off their cases early. However, they must remain in Chapter 13 for at least three years in order to avoid paying their debts in full, plus the trustee's 2 to 10% commission on the amount paid."

What does Chapter 7 cost?

"The court charges a $299 filing fee that must be paid up front if you are represented by an attorney. Our basic fee varies from time to time, but as of 9/04, it is $596, for a single or joint consumer Chapter 7 with no assets that the court can take. It all must be paid before the case is filed, unless we can agree on other arrangements. There are extra $100 charges for clients who have had businesses of their own during the last six years, and those who have more than 25 creditors. Please note that the law requires listing ALL creditors, even if those the debtor intends to pay.

Also, there are extra charges if a debtor is sued by a creditor for fraud, or there is an action within the case to determine dischargeability of a debt. Please refer to the fee agreement under the button 'Bankruptcy Worksheet.'"

How can I find out whether I have more than median income, creating a presumption against my eligibility for Chapter 7?

Go to www.usdoj.gov/ust/eo/bapcpa/bci_data/median_income_table.htm. The numbers are changed each year sometime in August or September.

How can I find sources of debt counseling that is a pre-requisite to filing and the course that lets me get a discharge?

"Try these websites to get the counseling and courses you need for your bankruptcy 'ticket in' and 'ticket out.'
Most of my clients go to Money Management International Inc., in Houston, Texas: www.moneymanagement.org, which offers the instruction through the inbternet or by phone at (877)918 2227, and faxes certificates of completion. They charge about $50.

Other sources to try are Consumer Credit Counseling Service units at: www.cccsinc.org
www.cccsso.org
www.cccswaor.org
www.cccamerica.org
Springboard Nonprofit Consumer Credit Management: www.credit.org
GreenPath, Inc.: www.greenpathbk.com

Services of any particular organization are not available everywhere, so you have to shop."