The United States Bankruptcy Court – District of Colorado describes a Chapter 7 Bankruptcy as:
Chapter 7, entitled Liquidation, contemplates an orderly, court-supervised procedure by which a trustee takes over the assets of the debtor’s estate, reduces them to cash, and makes distributions to creditors, subject to the debtor’s right to retain certain exempt property and the rights of secured creditors.
In simple terms, you have debts, you have assets and there are exemptions. A trustee appointed by the court, will take possession of your non-exempt assets and liquidate them, essentially turning them into cash. The trustee will then distribute the proceeds to your creditors. In most cases there are no non-exempt assets, this is known as a “no-asset case.”
The typical process for a Chapter 7 filing, is as follows:
- You and your attorney prepare your case.
- Your attorney files your case with the Bankruptcy Court.
- You and your attorney attend a creditors meeting with the trustee. In most bankruptcies, creditors do not attend these meetings.
- The trustee makes distributions (if there are any) to your creditors.
- The bankruptcy is discharged at which time you are typically debt free.
In most Chapter 7 filings you will never appear in court before a judge.
The Means Test
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 requires the application of a “means test” to determine whether individual consumer debtors qualify for relief under Chapter 7. This “means test” is based on the last six months of the debtors income and is tied to your household size. We strongly caution you not to prejudge the means test. This is where we come in, Jim Leerssen will review your unique situation and determine if you qualify based on allowable means test exemptions, the type of debt you carry and your legal household size (it’s not as easy as you think!)
We have found that many of our clients who thought they had to file a Chapter 13 reorganization were, in fact, able to liquidate all of their debt through Chapter 7.
Please call us at 970 686-2000 to discuss your unique situation.