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Often referred to as liquidation or straight bankruptcy, Chapter 7 bankruptcy is the most common type of bankruptcy. A typical Chapter 7 bankruptcy usually takes three to four months for the Court to process. At the Law Offices of Steven Dolson, our legal team has helped hundreds of Central New Yorkers obtain a Chapter 7 discharge and get back on the right track financially.
To begin the bankruptcy process, a petition must be filed with the court. A petition is only a few pages long, however, a person seeking to get a discharge must also file schedules within a short period of time. The schedules outline a person’s debt, property, income, expenses, and create a general overview of their financial situation. In most cases once a petition is filed, a Court order called the automatic stay is issued. This order protects most property from the actions of creditors. The debtor’s property is transferred to a bankruptcy estate, which, will be administered by a trustee.
After a petition is filed, the United States Trustee Office appoints the trustee, typically a local attorney, to manage and oversee the estate. It is the job of the trustee to sell the property of the estate, collecting as much money as possible for creditors. There are certain limitations on property that is transferred to the estate. These are specified within the bankruptcy code, and a debtor may also exempt property from the estate based on federal or state law. While a majority of Chapter 7 cases are “no asset” cases, meaning that a trustee does not sell anything, it’s important to discuss your case specifically with your attorney.
Between 20 and 40 days after a petition is filed the trustee will conduct a “meeting of creditors” also known as a 341 meeting. In most circumstances creditors do not attend this meeting. The person who filed the petition must attend the meeting and must provide the appropriate identification documents such as a Social Security card. Prior ot this meeting, the petitioner should have presented the trustee with financial documents such as tax returns, bank statements, deeds and titles to property. Once the meeting has closed, creditors have 60 days to object to the bankruptcy or a discharge will be obtained and the debts will be forgiven.
Obtaining a discharge means that a court order is granted that alerts creditors that you have been forgiven from your debts. However, there are certain debts that are exempt from discharge. These debts include personal income taxes within the past three years, child support, criminal restitution and student loans. Student loans can only be forgiven if you can prove that repayment of the debt would constitute an undue hardship. Proving undue hardship is very difficult and has a specific legal meaning. The leading case on the subject comes from the Second Circuit Court of Appeals, which, covers several northeastern states, including New York. The case is Brunner v. New York State Higher Education Corp. 831 F.2d 395 (2nd Cir. 1987) and requires the Court to undergo a 3 step analysis to determine if the loans create an undue hardship. The debtor must prove that they can not maintain a basic standard of living, that such circumstances are likely to continue into the foreseeable future, and that they have made a good faith effort to repay the loans. If you are considering filing a bankruptcy for the purpose of student loan forgiveness, you should speak with a competent attorney in your area before taking any action.
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