A Spokane bankruptcy lawyer can help you determine if you qualify for a chapter 7 bankruptcy filing. If this is the case, you still will have to make several decisions regarding your assets.
Here is a brief overview of the process and the highlights of chapter 7:
A. Introduction and Eligibility
1. Property of the estate is anything that you have legal or equitable interest in at the time of filing the petition.
2. Complicated test instituted to stop those who can afford to pay from getting out of their debts scot-free.
3. § 707(b) Means Test: The court may dismiss a case filed by an individual whose debts are primarily consumer debts, if the court finds that the granting of relief would be an abuse of chapter 7. The court assumes there is no abuse if the debtor’s income is below the median income for the state.
4. If the income is above the median income, then the debtor is subjected to the complicated § 707(b)(2)(A) test:
a. If the surplus income is less than $100/month you always pass the test.
b. If the surplus income is between $100 and $166, then your surplus must be less than 25% of the total unsecured debt.
c. If the surplus income is above $166, you’ll never pass the means test.
5. Expenses are calculated using the national standards, used by the IRS, supplemented by the code. Private schools may be covered up to 15%, payments to cure arrearages on priority debts.
B. Property Exempt from Seizure – § 522(d) You will need a Spokane bankruptcy lawyer to shield property.
1. The debtor may use the exemptions provided by the IRS Code. Some states have the option of opting out and forcing the debtor to use the exemptions provided by the state.
2. The trustee and creditors have only 30 days from the § 341 meeting to object to the claimed exemptions. – Rule 4003(b). § 522(l) states that, unless an objection is made, the property is exempted as claimed.
3. As a general rule, a debtor’s exemption doesn’t prevail against the holder of a valid consensual security interest in that property. By granting the interest, a debtor has effectively waived the right to assert the exemption against the consensual lienholder. Statutory liens are also usually immune from exemption claims.
4. An exemption normally takes precedence over a judicial lien that attaches to the property - § 522(f)(1)(A).
5. The debtor may avoid a non-possessory non-purchase money security interest in specified household or consumer goods, tools of trade, or professionally prescribed health aids to the extent that the security interest impairs an exemption in such property - § 522(f)(1)(B).
6. If you want to keep your property that is only partially exempt, you must pay the difference between what you owe and the exemption.
7. Exemptions are property of the estate until their status is clarified.
8. Remember, § 522(b) – rules about state law, adjusted by § 522(o).
C. Claims and Distributions
1. § 101(5) The term claim means (A) the right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured.
To qualify as a claim, the obligation must give rise to a right to payment; a non-monetary right (such as an injunction that merely mandates or restrains some conduct of the debtor without any alternative for a monetary remedy) is not a claim.
If the obligation is not a claim, the obligee has no right to participate in the bankruptcy distribution, and the obligation is not discharged in bankruptcy
A claim is unliquidated if its amount is not fixed and certain and cannot be calculated arithmetically from known data.
A claim is contingent if the debtor’s liability is conditional upon the happening of a future uncertain event.