What is the process of a Chapter 7 bankruptcy?

When a New York debtor decides to file for Chapter 7 bankruptcy, the first step is preparing the information that the court requires. This includes a list of all creditors with the nature and amount of debt and an explanation of the nature and amount of the debtor’s income. The court will also require a list of all property that the debtor owns and a detailed list of living expenses. If the debtor is married, the court will need all of the same information from the spouse as well. All of this information allows the court to accurately evaluate the debtor’s financial position.

When filing for Chapter 7 bankruptcy, the debtor will need to file all relevant paperwork with the local bankruptcy court. For individual debtors, this would be the court that serves the location of the debtor’s primary residence. For a business debtor, this would be the location of the principal place of business or principal assets or where the business is organized.

Once the debtor files the paperwork and handles the filing fees, the court will stay most collection activities against the debtor, including wage garnishments, lawsuits and even collection calls. The debtor will attend a meeting of creditors with the case trustee so that the case trustee can report to the court whether it should consider the case an abuse under the means test.

For many debtors, Chapter 7 bankruptcy can help them get their lives back on track. The law limits how often a debtor may file for bankruptcy relief, though, which is why it is very important that the information that the debtor provides to the court is complete and accurate. The debtor should also be aware that filing bankruptcy can harm his or her credit history and certain debts may not qualify for discharge.

Source: United States Courts, “Liquidation Under the Bankruptcy Code“, September 14, 2014