How does someone file for Chapter 7 bankruptcy?

By William “Willie” Glascock, Bankruptcy Attorney  

We know that reaching a point in your life where you are contemplating bankruptcy is disruptive, emotional, and devastating.  But you should know that it’s not the end of the world. In fact, I would say that 95% of my clients tell me it wasn’t as bad as they had originally imagined!

So I wanted to walk you through what a Chapter 7 bankruptcy experience is really like, to give you a little more assurance that you’ll get through it just fine, and come out on the other end with some kind of peace of mind.

So the way it works:  you begin by talking to our owner, Tom Bible.  Over the last 14 years, Tom’s become the Chattanooga area’s largest bankruptcy filer, so he’s seen everything – and I mean EVERYTHING.  He assesses your situation with your assistance, and then gives guidance and helps determine what type of bankruptcy you should be going for.  Then, once the assessment is done, your case gets assigned to one of our four attorneys. That’s where I come in!

What happens next is that we help you file the appropriate paperwork.  Then, you go into what is referred to as a “meeting of creditors.” You are appointed a trustee by the court.  The trustee is sort of like an attorney who represents your unsecured creditors. This is the part that usually has people in knots – “Is he going to judge me?”  “Is he going to humiliate me and my family?” “Is he going to grill me for hours on end?” Rest assured that none of these things will happen to you. The court simply doesn’t want you to just get a free pass and not get your filing vetted by anybody, so the trustee is really just the court-appointed gatekeeper.  

The trustee is really just going to be helping you look for undervalued assets, or assets you might have inadvertently left off of your petition:  i.e. a Ferrari in the basement, or a beach house in Florida you forgot to tell us all about. Sometimes our clients have situations that they just didn’t know about, such as the potential to sue over some debt you’ve accrued, or an inheritance.  They will merely ask questions, and chat through patterns of behavior: for example, why you have all this debt will help them discover potential solutions you haven’t thought of. Usually these meetings with the trustee are less than an hour and not painful – it’s just a matter of routine questions they have to ask.  

Now, what you might NOT know is that when you file chapter 7 bankruptcy, you can protect up to $10k of personal property.  This will include things like clothes, jewelry, furniture, etc. Also there are certain real property exemptions, and these vary by age, how many in household – but the range is anywhere from $5-25k.  Keep in mind that you have double the exemptions when you file as a married couple. Usually, the most common interaction with the trustee is over your house value. If they add up the mortgage, and add the exemption – assume 6% cost of sale – add all 3 up – if the value of the house is MORE than that, then the trustee can negotiate with them.  So going a little deeper, if you had $100k tax-appraised house with a 50k mortgage; the exemption is $10k – 6% cost of sale – you’re at $66k. There’s a $44k “swing” that trustee wants to try and get. This can all be negotiated, and THAT’S where I come in. Understand that trustees get paid on commission if they can find assets that go above their exemptions, so this is why they have a vested interest in thoroughly understanding your financial state.  

So that’s basically the process.  We are there every step of the way to ensure you get treated fairly and that any negotiation with the trustee goes in your favor.  Soon, we will be writing about life after declaring a Chapter 7 bankruptcy, and dispelling some myths about what you can own, and how soon the bankruptcy comes off your credit report.  So be looking for that.

If you are struggling with excessive debt and looking for a sound solution, the attorneys at Tom Bible Law, can help you explore your legal options. We have helped numerous clients from Chattanooga and throughout Tennessee and North Georgia achieve their debt relief goals by guiding them through the bankruptcy process.  We work with every client personally, giving each and every bankruptcy case the time and attention it needs. We understand the financial pressures our clients are facing and work to resolve their debt problems in a favorable, cost-effective manner.  Our bankruptcy lawyers have more than 50 years combined experience and are here to help. Call us today at (423) 690-7712 or drop us a note here.

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