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Chapter 7 Bankruptcy


Home....About....email....Call 901-757-5557
Talk to another attorney and talk to us.
Judge the difference.

The principal attorney in our law firm is William A. Cohn, has over 25 years of experience in Bankruptcy.   


Chapter 7 - Straight Bankruptcy/ for all entities liquidation
I.
COSTS:

$335.00 Filing Fees (which is paid to the Court) and expense fee for credit reports, photocopies, check handling, postage, etc. For a total of $450.00.

PLUS:

*$675.00 for individual (commonly called a "consumer bankruptcy")

*$775.00 for individual with sole proprietorship as a "side job" or for "extra income"

*$975.00 for husband and wife (commonly called a "consumer bankruptcy")

*$995.00 for husband and wife with sole proprietorship as "side job" or for "extra income"

*$1,250.00 for individual or husband & wife (which have 12 or more creditors) also for small business sole proprietors

*$1,450.00 for corporations and partnerships

* Includes all consultations & work exclusive of litigation and motions, and one phone consultation per week until 4 weeks after creditor's meeting. Allow 3 weeks for the petition to be typed and ready to sign for filing.

 ** All Attorney fees and filing fees and expenses must be paid before Petition will be filed.

Call 901-757-5557 for a free appointment to discuss your situation.


Chapter 7 and Chapter 13 are commonly called "consumer bankruptcies".
II. SECURED DEBT vs. UNSECURED DEBT

 A. Secured debt is a debt where the Creditor can take back, repossess, or foreclose an item in satisfaction of his debt. In other words, a mortgage company can foreclose on your house; a bank or finance company can repossess your car or household goods; a furniture sales company can take your furniture back; or a jewelry store can take back your jewelry. Where the Creditor extends to you the credit to make the purchase for consumer goods, that is a secured debt also.

B. An unsecured debt is a debt where a creditor cannot repossess an item or foreclose on any item. Examples of this type of debt are: Credit cards, such as Master Card, VISA, and American Express; Signature Loans; Deficiencies on Cars that have been repossessed or houses that have been foreclosed; doctor bills, hospital bills, lawyer bills; and suppliers of small businesses that do not have a security interest in the goods.


III. CHAPTER 7

Chapter 7 is a straight bankruptcy. It is a liquidation. A liquidation is where the trustee collects all of your assets and sells any assets which are not exempt, or sells the assets and pays the debtor the amount exempted. The net proceeds are used to pay the Trustee a commission and to be distributed to creditors. You wipe out your debts and get a "Fresh Start".

In a Chapter 7, after you file it, the next day you do not owe anybody anything. Your debts are "discharged".   (Actually, your debts are discharged when the Order of Discharge is signed by the Bankruptcy Judge.  However, the signed Order relates back to the date of filing, so effectively your debts are wiped out the day after you file).  All of your secured assets go back to the creditor (if you wish that to be the case). You do not owe any of your unsecured debts after that time. Certain debts cannot be discharged, such as alimony, child support, fraudulent debts, certain taxes, certain student loans, and certain items charged.

You may keep certain secured debts such as your car or your furniture or house by reaffirming those debts. To do so, you must sign a voluntary "Reaffirmation Agreement". However, you cannot wipe out that debt (or discharge the debt) for another six years. In other words, if you decide that you want to keep your house or your car or your furniture, and you reaffirm the debt, you cannot bankrupt (or wipe-out) that debt again for six years. You will still owe that debt and you must continue to pay it just as you were to continue to pay it before you filed the bankruptcy. In order to reaffirm the debt, you must also bring it current. In other words, if you are three or four months behind, then you must pay the back payments which are due in order to reaffirm it. You can selectively reaffirm your debts - you can state that you wish to keep the house and the furniture, but that you want the car and the jewelry to go back to the respective Creditors.

Reaffirmation agreements can be set aside during the earlier of 60 days after the agreement is filed with the Court, or upon the Court's issuance of an Order of Discharge.

Call 901-757-5557 for a free appointment to discuss your situation.


IV. THE AUTOMATIC INJUNCTION

The automatic injunction is in effect on all bankruptcies. Anytime you file a petition for relief in the Bankruptcy Court, there is an automatic injunction preventing any creditor from doing anything to collect a debt.


V. TYPICAL RECOMMENDATIONS

Typically, we see two situations develop in Consumer Bankruptcies.

A. The first situation is where a client has secured debts in which he is current or only one or two months behind. In other words, he may be one or two months behind on his house note, one or two months behind on his car note, and the same for his furniture and jewelry note. However, he comes to us and says "I have been sick and I have a tremendous amount of medical bills (unsecured debt)"; or "I'm going through a divorce (or some sort of domestic problem); and I am at my limit on all my credit cards and I owe a tremendous amount" (of unsecured debt). He says if he just didn't have all of this unsecured debt and that if he wasn't making monthly payments on this unsecured debt, then he would be able to make his payments on his secured debt. In that instance, we recommend a Chapter 7 straight bankruptcy because he is able to discharge all of the unsecured debts and obtain a "Fresh Start". After reaffirmation of this debt and payment of delinquent installments, he can easily keep up his monthly notes.

B. The other situation is where the client arrives and states that he is three or more months behind on his house note, three or four months behind on his car note, several months behind on his jewelry and furniture note, and that even if he discharged all of his unsecured debts he still would not be able to bring his secured debts current. He may not even have any unsecured debt. However, he does not wish to lose his assets, but merely needs time to pay off any arrearages that he owes. This person is a candidate for a Chapter 13 wage earner plan. It allows him to pay off his debts and to preserve his assets. That is our recommendation in such a circumstance.

C. There is a gray area in between the two recommendations. Many people also feel that they have a moral and ethical obligation to pay out their debts. In those circumstances, a Chapter 13 (Wage Earner) Plan would be our recommendation. In the gray areas, it is largely a decision of the client.

D. If the Bankruptcy Chapter that you choose does not work out, you may be able to convert to another Chapter. You have the absolute right to dismiss a Chapter 13, or to convert a Chapter 13 to a Chapter 7.

Call 901-757-5557 for a free appointment to discuss your situation.


VI. STUDENT LOANS

Government issued student loans are not dischargeable. The debtor must file a complaint to determine dischargeability. This is not a part of a simple Bankruptcy filing. It may be the case that the debtor would not have this debt discharged as the Bankruptcy Courts are very conservative in allowing a person to be determined as such a hardship.


VII. TAXES

Generally, taxes cannot be discharged in a Chapter 7 straight bankruptcy.

However, under certain limited circumstances, Federal Income tax can be discharged in bankruptcy if they are more than three calendar years old, all tax returns have been timely filed, and the tax has not been assessed by the IRS within the 9 months before the filing of the Bankruptcy petition. Liens placed by the IRS can also prevent discharge. You need to consult with the attorney if this is a problem.

Obviously, taxes CAN be paid out in a Chapter 13 wage earner plan and the IRS can be stopped from enforcing any liens or other collection procedures by the filing of the Chapter 13 Wage Earner Plan.

A complaint to determine the dischargeability should be filed. This is not a part of the simple Bankruptcy filing.


VIII. BANK ACCOUNTS

Any time you file a bankruptcy, if you have a checking or savings account or any other kind of deposit account with a bank to whom you owe any money for a loan or credit card or other matter, then you should close out your checking and savings account and certificate of deposit or any other account that you have, and move it to a bank to whom you owe NO money. This will prevent that bank from obtaining a set-off of your funds.


IX. ADVERSE SITUATIONS

Call 901-757-5557 for a free appointment to discuss your situation.

Chapter 7 discharge can be denied by the Court under certain circumstances such as concealing property, destroying or falsifying records, or fraud. These also can be criminal matters.

A discharge under Chapter 7 can also be denied as to specific debts when a creditor files an "Objection to Discharge." Only that creditor's debt or a portion of that debt may be kept from being "wiped out." Examples are certain taxes, support, loans obtained by false financial statements or by fraud, and loans obtained when you are insolvent ( that is, when you borrow money by loan or by credit card and your debts exceed your assets-at the time of the loan-, and you are unable to repay the money borrowed).

A Chapter 7 should not be filed before a divorce is finalized.

A proposed Chapter 13 Plan can be denied confirmation (approval by the Court) if the Court, after a hearing, feels the proposed plan to be unfeasible (not enough available income to fund the plan), not proposed in good faith, or not paying the correct amounts according to the law.

A proposed Chapter 11 Plan can be denied confirmation if not approved by vote of the creditors, or if it fails to meet certain guidelines required by law.


X. MISCELLANEOUS

A Bankruptcy will stay on your credit record from the time of filing until the credit reporting agency's roll over period. This is usually eight years, and can be as much as 10 years.

There are always other circumstances that need to be addressed and questions that need to be answered. Please feel free to ask the lawyer what happens in these circumstances.


WILLIAM A. COHN

Member: American Bar Association

Member: Commercial Law League of America

Author of: "Deferring Vesting of Property in a Chapter 13 Wage Earner Plan"

Commercial Law Journal (August, 1983).

 

Representative debtor clients:

Chapter 11:

Nomad Construction Company                     Mid South Equipment Sales, Inc.

Blackie's Body Shop, Inc.                            Mid South Equipment Rentals, Inc.

B & P Enterprises, Inc.

One Memphis Place

Hayes & Sons Body Shop, Inc.

Hickory Hill Shopping Center

Chapter 7: The Donut Shop, Inc.

Old Southern Tea Room, Inc.

(conversion from Chapter 11)

Null's Service, Inc.

(conversion from Chapter 11)


WHAT HAPPENS AFTER FILING CHAPTER 7 PETITION

Call 901-757-5557 for a free appointment to discuss your situation.


SECTION ONE

The filing of a Chapter 7 Bankruptcy Petition constitutes an automatic injunction against any creditor to collect any debt.

A. If you are called by a creditor or collection agency before the filing of the Chapter 7 Petition, merely tell them that THE COHN LAW FIRM represents you and that they are filing a Chapter 7 Bankruptcy Petition for you and that they should direct all calls to our office and not call you anymore.

B. Approximately five days after your interview in our office where you have signed all of your petitions and documentation to be filed in Court you should call our office to obtain your bankruptcy number. This is the number that the Court uses and is called a DOCKET NUMBER. If any creditor or collection agency calls you or any one has threatened to repossess your car or has started foreclosure proceedings you should call this creditor and tell them the bankruptcy number. Also inform them if they start to question you, that ALL communication is to be through your attorney THE COHN LAW FIRM in as much we have instructed you to do so.

C. Additionally, once we have filed the Chapter 7 Petition and you have obtained your bankruptcy number from us, if you want a payroll deduction and have a garnishment about to be placed or it has been placed on your wages, you should inform your employer immediately of the bankruptcy number and the type of bankruptcy and that they should contact our office for further information if they need it. They should also contact their lawyer if they have any questions. In any event, they are prohibited from honoring any garnishment on your wages once the Chapter 7 Petition is filed. The same applies to any sheriff appearing to repossess any car or any other item such as a car. Merely tell them the bankruptcy number and the attorney's name and he should be aware of the automatic injunction preventing him from collecting this debt or doing anything attempting to collect this debt.


SECTION TWO: NOTICE OF INFORMATION

Approximately one week after the filing date, you will receive an order from the Court setting your Creditor's Meeting. This will be a piece of paper with many boxes but which will list your Bankruptcy number and the date, time, and place of your Creditors' Meeting.


SECTION THREE: CREDITORS' MEETING

Approximately, three weeks after you receive the notice from the Court and four weeks after the filing of your bankruptcy, there will be a Creditors' Meeting held at the Bankruptcy Court. YOU MUST ATTEND OR YOUR CASE WILL BE DISMISSED. IF YOU ARE FILING JOINTLY, BOTH OF YOU MUST ATTEND. Call our office: 1) if you do not receive notice of the Creditors' Meeting within three weeks; or 2) if you cannot attend the Creditors' Meeting. YOU WILL BE CHARGED AN ADDITIONAL FEE IF THE LAWYER GOES TO THE CREDITORS' MEETING AND YOU DO NOT APPEAR. You must attend a Creditors' Meeting. You should arrive approximately ten minutes early to the creditors' meeting. Have a seat in the creditors' meeting hearing room. An attorney from THE COHN LAW FIRM will be present to hear your case. If the hearing examiner or Trustee calls your name or the attorney's name and he is not there, stand up and mention to the examiner that you are arriving shortly. Many times we get caught in another court and arrive late for a hearing. However, we will try to avoid this situation.

The Creditors' Meeting is not like a trial in which Perry Mason is working. It is merely an informal question and answer session. Creditors will want to have the correct information and have reaffirmation agreements signed. The Trustee will want to know if there is any equity in any of your assets so that he can resell the assets and make a commission (and make a small payment pro rata to unsecured creditors). They will ask you questions about what happened to certain collateral security or about your income or any other financial information. You should be prepared to answer these questions. If you have any questions, you should contact us and discuss these matters prior to the hearing. The vast majority of the time, the questions asked are harmless and present no problems to the Debtor. However, if you show on your Income & Expense Schedules that you have a surplus if income after your expenses are paid each month, or if the trustee feels that you can return one or more secured items and have money available (from not having to pay those secured debts), then the U.S. Trustee may file a Motion to Dismiss your Chapter 7 bankruptcy, stating that you are abusing the bankruptcy process. This motion is based on the fact that the U.S. Trustee and the Judge may feel that you could pay the creditors some percentage of what you owe them in a Chapter 13 "Wage Earner" bankruptcy with that surplus income. As of October 1, 2005 Congressional Legislation has made that requirement law.

Bring your driver's license and Social Security Card to the Creditor's Meeting.

The U.S. Trustee will ask the following questions at the Creditors' Meeting, and you should read this and your previous information sheet for their answers:

a) the potential consequences of seeking a discharge in bankruptcy- debts discharged, assets lost over and above exemptions;

b) the effects on your credit history- the bankruptcy will be on your credit history for more than 8 years.

c) the fact that you can file a Chapter 7, 12, or 13.

d) the fact that a discharge in bankruptcy relieves you of all responsibility and obligation to pay listed debts unless you re-affirm the debt (agree to continue paying); and that re-affirmation of a debt binds you to pay that debt and it is not dischargeable for 6 years (unless you file a Notice of rescission of the Re-affirmation with the Court within 60 days of signing it).

e) your duties to disclose all debts and assets and their locations.

f) the fact that there exists the possibility of fines and other penalties for fraud and abuses of the bankruptcy system.

g) the fact that you can be barred from filing bankruptcy and stopped from discharging your debts if you violate Bankruptcy Code 707(b), which is to commit a fraud or abuse the bankruptcy system.


SECTION FOUR:   RIGHTS OF CREDITORS AFTER CREDITORS' MEETINGS

Approximately 90 days after the creditors' meeting, the bar date set by the Court will pass and the creditors will no longer be able to file an objection to discharge (unless the Court extends the time for filing the objection).

Approximately 150 days after the Creditors' Meeting, you will receive an Order of Discharge from the Court.


SECTION FIVE:    PROCEEDINGS AFTER THE CREDITORS' MEETING

After the Creditors' Meeting, several things may happen. For each of these things, our contract with you states that these items will incur additional attorney fees. In other words, we must bill you by the hour, or in advance for additional items.

A. If you have failed to sign a re affirmation agreement, a secured creditor may come in and ask the Court to lift the automatic stay to allow them to repossess an item such as a car or to foreclose on real property such as a house or building. For defending this, we must charge you an additional amount.

B. Motion to Amend
If you leave off creditors or you fail to tell us about creditors, then add a creditor later, requires an additional proceeding. There is a $20.00 filing fee plus an attorney fee.
The filing fee goes to the Court.

C. Objections to Discharge
On occasion, a creditor will attempt to have his debt exempted from discharge; that is, not wiped out. He will file a lawsuit objecting to the discharge which we must defend. This would require additional attorney's work and additional billing by the attorney.

D. There are various other Motions which can be filed and which address select situations. These include (but are not limited to):
1. Motion to Dismiss by the U.S. Trustee (see Section 3, above);
2. Motion to Redeem (see Section 8, below);
3. Motion to Avoid Lien (see Section 8, below).

Call 901-757-5557 for a free appointment to discuss your situation.


SECTION SIX:    HOUSE MORTGAGE SITUATIONS

You will have to resume your payments to the mortgage company and pay any and all delinquent payments if you wish to keep your house.

If you wish to surrender your house, you should make arrangements to vacate the house promptly, and in no instance past the creditors' meeting. The creditor should be notified and given possession of the keys.

TRUSTEE'S ACTIONS

If you elect to re-affirm your mortgage, and if you have a substantial equity in your home, the Trustee can sell the home , pay your first mortgage, pay to you your exemption, pay himself a fee, pay the real estate agent and the costs of closing, and distribute the balance to unsecured creditors on a pro rata basis. The Trustee can send an appraiser to your home to appraise the value of the home.

That being said, you have the absolute right to convert your chapter 7 to a chapter 13 plan anytime before you receive an Order of Discharge should the Trustee elect to so proceed. You therefore would not lose your home.


SECTION SEVEN:   SECURED ITEMS BEING REAFFIRMED

You will receive a Reaffirmation Agreement for the personal property that you wish to keep. This will keep the debt from being wiped out (or discharged). You will then still owe the debt and will have to continue to timely pay the installment payments. You can be sued later or have the property repossessed or foreclosed upon if you later default in these payments.

Different creditors react differently. Some creditors will not sign a Reaffirmation Agreement and will make no effort to repossess the property. Some creditors will only sign the agreement if you will agree to reaffirm their unsecured debt also.


SECTION EIGHT:      SECURED ITEMS NOT BEING REAFFIRMED

***You should contact each secured creditor once for small items.

***For large items, such as a car, drive it to their office and give them the key.

***You will not owe the debt when the item is returned or tendered.

***You will no longer owe any of the unsecured debts.

You may also keep the items and discharge the debt in certain select situations.

We can file a MOTION TO allow you to REDEEM certain secured consumer personal property in which the value has greatly diminished. If the Court approves it, you can tender the approved amount to the creditor, discharge the debt, and keep the property.

We can file a MOTION TO AVOID a LIEN if you have property valued at less than your allowed exemption amount and if you put up that consumer property as security for a loan. This is not applicable where you were extended credit to purchase the property.

You must advise us if you meet these requirements as we do not automatically file these motions. There is an additional charge for each of such motions as there are additional court appearances, and you no longer have a "simple" bankruptcy.


SECTION NINE:   RE-FILING

***You cannot file another Chapter 7 petition for 8 years from the date of discharge.
***You can, however, file a Chapter 13 petition after your Chapter 7 case is closed.
***You must pay 100% of your unsecured debt in such a Chapter 13 case.


SECTION TEN:   TELEPHONE CALLS AND APPOINTMENTS

The attorney will be happy to answer your questions if he/she is available. If not, the staff will answer your questions, or, if they cannot, they will take your question to the attorney and call you back with an answer. Do not expect call backs from the attorney. If the attorney feels that it is important, he may call you back. The attorneys carry mobile phones and call in for messages, and they will call you back if your question merits their personal call. You should be available to take the call. Attorneys will not spend time playing with pagers, and will not play telephone tag with you. They will always be available for appointments in the office. If you feel that you have an important item to discuss, call and make an appointment with the attorney. The time you spend coming to an appointment will be less than the time you spend playing telephone tag. If you do not feel it is important enough to make an appointment, then it is clearly not important enough for a special return call from an attorney.


SECTION ELEVEN:   PAYMENT OF ATTORNEY FEES AND COSTS

Any balance owed to this Firm must be paid before the first creditors' meeting or the Bankruptcy Court will dismiss your bankruptcy   You will be charged additional fees for certain post filing representation.

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Phone: 901-757-5557
Cordova (Memphis), Tennessee

Talk to another attorney and talk to us.
Judge the difference.