Chapter 7 Bankruptcy: How it Works

Chapter 7 Bankruptcy: How It Works

A chapter 7 case begins with the debtor submitting a petition with the bankruptcy court serving the area in which the individual lives or where the business debtor is organized or has its principal corporate offices or principal assets. (3) Beyond the petition, the debtor also needs to file to the court: (1) schedules of liabilities and assets; (2) a schedule of current income and expenditures; (3) a statement of financial affairs; and (4) a schedule of executory contracts and unexpired leases. Fed. R. Bankr. P. 1007(b).

Debtors also need to provide the assigned case trustee a copy of the tax return or transcripts for the most recent tax year along with tax returns filed over the course of the case (including tax returns for prior years that had not been filed when the case began). 11 U.S.C. 521. Individual debtors with primarily consumer debts have additional document filing requirements. They need to file: certificates of consumer credit counseling along with a copy of any debt repayment plan developed through consumer credit counseling; evidence of payment from employers, if any, received 60 days before filing; a statement of monthly net income and any anticipated improvement in income or expenses after filing; and also a record of any interest the debtor has in federal or state qualified education or tuition accounts. Id. A couple may file a joint petition or individual petitions. 11 U.S.C. 302(a). Even when filing jointly, a couple are susceptible to every one of the document filing requirements of individual debtors. (The Official Forms may be purchased at legal stationery stores or downloaded from the internet at www.uscourts.gov/bkforms/index.html. They are not available from the court.)

The courts must charge a $245 case filing fee, a $39 miscellaneous administrative fee, and a $15 trustee surcharge. Normally, the fees should be paid to the clerk of the court upon filing. With the court’s permission, however, individual debtors may pay in installments. 28 U.S.C. 1930(a); Fed. R. Bankr. P. 1006(b); Bankruptcy Court Miscellaneous Fee Schedule, Item 8. The quantity of installments is limited to four, plus the debtor must make the final installment no later than 120 days after filing the petition. Fed. R. Bankr. P. 1006. For cause shown, the court may extend the time of any installment, provided that the last installment is paid not later than 180 days after filing the petition. Id. The debtor might also pay the $39 administrative fee and the $15 trustee surcharge in installments. If a joint petition is filed, only one filing fee, one administrative fee, and one trustee surcharge are charged. Debtors should be aware that failure to pay these fees may result in dismissal of the case. 11 U.S.C. 707(a).

If the debtor’s income is less than 150% of the poverty level (as defined in the Bankruptcy Code), and the debtor is unable to pay the chapter 7 fees even in installments, the court may waive the requirement that the fees be paid. 28 U.S.C. 1930(f).

In order to complete the Official Bankruptcy Forms that make up the petition, statement of financial affairs, and schedules, the debtor must provide the following information:

1.A list of all creditors and the amount and nature of their claims;
2.The source, amount, and frequency of the debtor’s income;
3.A list of all of the debtor’s property; and
4.A detailed list of the debtor’s monthly living expenses, i.e., food, clothing, shelter, utilities, taxes, transportation, medicine, etc.

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