The Chapter 7 Bankruptcy is often called the “straight” bankruptcy. The purpose of Chapter 7 is to help an individual get a “fresh start.”

At the outset of a Chapter 7 proceeding, the court appoints a trustee. The trustee’s job is to gather the debtor’s non-exempt assets if any, and sell them to pay off a portion of the creditor’s claims. Because both Texas Exemptions and Federal Exemptions are so broad, most cases do not have any personal property that is sold. Chapter 7 Bankruptcy can also be used to help a business obtain debt relief by liquidating its assets and terminating its operations.

When an individual debtor receives a discharge in Chapter 7, the bankruptcy will eliminate the debtor’s personal liability on dischargeable debts, and the debtor gets a FRESH START. The discharge will not extinguish a lien on the property, which means an IRS lien will survive a Chapter 7 discharge. Some debts are not dischargeable under Chapter 7, such as student loans, certain income taxes, payroll taxes, and debts obtained by fraud.

Attorney for the Chapter 7 Bankruptcy in Plano, TX

A bankruptcy attorney in Plano, TX, can help you decide the best time to file for bankruptcy and whether you should file the petition under Chapter 7 or Chapter 13 bankruptcy.

An experienced lawyer can explain whether your property and assets will be protected if you decide to file for bankruptcy. Especially after the new requirements under the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005 went into effect. Filing for personal chapter 7 bankruptcy is more complicated.

If you need to file a Chapter 7 in Dallas, TX, then contact Littlefield Law Firm. We represent clients in bankruptcy court throughout the greater Dallas-Fort Worth area including in the Northern District of Texas at the Earle Cabell Federal Building in Dallas. We also represent clients in the US Bankruptcy Court for the Eastern District of Texas in Plano, TX.

Littlefield Law Firm is located in north Dallas, Texas. Our lawyers represent clients throughout Dallas County, Collin County, Denton County, Kaufman County, and Rockwall County.

Call (972) 812-0900 today.

Debts Not Discharged under Chapter 7 Bankruptcy

Although most types of unsecured debts are legally dischargeable upon completion of the bankruptcy proceeding, some types of debt are not. The most common types of debts that are exempt from discharge in bankruptcy are:

  • child support;
  • property taxes;
  • income taxes less than three (3) years old;
  • court-ordered fines and restitution in criminal cases;
  • student or educational loans (unless the debtor prevails in an adversary proceeding);
  • spousal support (which is not covered by a bankruptcy filing); and
  • any property settlements made through a divorce.

 

Means Testing in a Chapter 7 Bankruptcy

In a Chapter 7 Bankruptcy, the trustee reviews the debtor’s budget, which must be included in a form known as the “Means Testing form.” In a consumer bankruptcy case under Chapter 7, the majority of the debts are considered “consumer” in nature. Consumer debts include car debt, household debt, medical bills, and credit card debt.

Business debt can include IRS taxes and personal business guarantees. Additionally, if a debtor uses a credit card to buy things for his or her business, then it might be considered business debt instead of consumer debt. Even if that credit card debt is in the debtor’s name and not in the name of the business (often called the “business debt exception” to the means test), it can still be considered “business debt.”

The purpose of the “Means Testing Form” is to determine the debtor’s budget based on the fact that the bankruptcy petitioner does not have funds left over in his or her budget that could be used to pay the debts that the he or she is seeking to have discharged.

The income limit used in a means test is determined by looking at an individual’s state and family size.

The Commencement of the Chapter 7 Bankruptcy

After the commencement of a liquidation case under Chapter 7 of the Bankruptcy Code, a bankruptcy estate is created. Under 11 U.S.C.A. § 541(a), property acquired by the debtor after he or she files Chapter 7 does not generally become part of the bankruptcy estate, although some exceptions apply.

For example, the proceeds, product, offspring, rents, or profits of or from the property of the estate themselves also become the property of the estate under 11 U.S.C.A. § 541(a)(6). Additionally, any interest in property that the estate acquires after the commencement of the case becomes the property of the estate.

Other exceptions to this general rule include interests inherited by the debtor within the 180 days after the bankruptcy come into the estate as provided by 11 U.S.C.A. § 541(a)(5)(A). Additionally, property acquired by the debtor as a result of a property settlement in a divorce or as the beneficiary of a life insurance policy become estate property under 11 U.S.C.A. § 541(a)(5)(B), (C).

When a debtor files for bankruptcy, all of the debtor’s property becomes the property of the estate, including any property that the debtor intends to claim as exempt as provided in 11 U.S.C.A. §§ 522, 541(a)(1-2). The debtor must take affirmative steps to claim the property as exempt. Otherwise, the property will remain in the bankruptcy estate.

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