Will I Have To Go To Bankruptcy Court After I File Chapter 7 or Chapter 13?

After filing bankruptcy, you will be required to go to bankruptcy court after filing a chapter 7 or chapter bankruptcy.  All debtors must appear at the meeting of creditors.  Some will need to appear to reaffirm car debt.      

1. Bankruptcy Court's Meeting of Creditors

When filing a personal bankruptcy under a chapter 7 or chapter 13, you will be obligated to attend the "meeting of creditors."  A "meeting of creditors" is not in front of a judge. --That's good news!-- Instead, you are examined by a trustee.  For meetings held at the Fresno Federal Courthouse, there are 5 different trustees that run the meetings.  These trustees have legal or accounting backgrounds.  


Do you want to know where Fresno's bankruptcy court is located and details of what happens at a meeting of creditors?  Here is a link to one of my more popular articles: 

What to Expect At Meeting of Creditors at Fresno's Bankruptcy Court

Usually the creditors meeting takes place between 20 and 40 days after filing chapter 7.  Chapter 13 meeting of creditors occurs a few weeks later.  

The main goal of the meeting of creditors is for the trustee to ask questions of the debtor related to their financial condition.  They want to see whether the debtor has any non-exempt assets that can be sold and paid to creditors. They also want to ensure the debtor is being honest about their financial situation.  The meeting is set with other debtors.  On average, the meeting lasts about 5 minutes.  Some meetings, however, can last longer if there are complicated issues involved.  Meetings can last longer because the debtor is represented by an unprepared attorney, or if the debtor is not represented by an attorney at all. 

The meeting permits the trustee to review the debtor's petition and schedules with the debtor face-to-face. The debtor is required to answer questions under penalty of perjury.   

2. Reaffirmation Hearing

Do you own a car with a loan?  If so, your car loan is secured to the car, which means the creditor can repossess the car if you breach your contract.  Most car creditors have the right to repossess the car, even though the debt owed to the car is discharged. 

If you wish to keep your car, you will need to decide whether to "reaffirm" the debt. A reaffirmation agreement is an agreement by which a bankruptcy debtor becomes legally obligated to pay all or a portion of an otherwise dischargeable debt. The agreement must generally be filed within sixty (60) days after the first date set for the meeting of creditors, but before the discharge is entered. You do not have to reaffirm a debt.  This is a voluntary agreement.  

If you decide to reaffirm your secured property, like your car, the protections of the automatic stay are terminated.   Since a reaffirmation agreement takes away some of the effectiveness of your discharge, legal counsel is advisable before agreeing to a reaffirmation. 

If you are not represented by an attorney, you and the creditor will file an application for approval of the agreement, along with a request for hearing. An order approving the agreement should be brought to the hearing. You must appear in person at the hearing. The judge will ask you questions to determine whether the reaffirmation agreement imposes an undue burden on you or your family and whether it is in your best interests. The judge will only reaffirm those secured debts that you can afford and is important to you to make a living. The judges in Fresno do not reaffirm home loans.  

Photo: Phil Roeder at Flickr

More Families Soon To Qualify For Chapter 7 Bankruptcy

Photo by: torbakhopper at Flickr

Do you need to file a chapter 7 bankruptcy? Do you make too much money? Beginning November, rule changes will allow a few more higher income households to file Chapter 7 bankruptcy in California.

Too Rich To File Chapter 7?

One hurdle to a bankruptcy discharge in a Chapter 7 is the "means test".  This test guards against bankruptcy abuse--those debtors that can afford to pay back their creditors.  The "means test" analyzes your household income and expenses.  The goal is to determine whether you can pay back your creditors.  "Passing" means it is presumed you cannot.  "Flunking" means you may be able and may need to file bankruptcy under another chapter, like a Chapter 13 bankruptcy.     

Step One: How Much Do You Make?

Below is the newest median yearly income for a households in California, effective November 1, 2014:   

If your single and your gross income is less than $49,185, than you pass.  (See the graph above.)  If you live with a spouse, you and your spouses combined grossly income must be below $63,745.  And so on...

If household income, compared to family size, exceeds the numbers permitted in the graph, further "testing" is required.  You will need to deduct permitted household expenses.

Step Two: Analyze Monthly Expenses

The amount a household earns is just one factor.  If your family income exceeds the permitted median income listed above, you may still be able to pass the means test.  This part of the means test is too fluid and therefore too complicated to attempt to explain it in a blog.  You will want a bankruptcy attorney take over at this point.  However, here is a quote from the Department of Justice about analyzing household expenses inside the "means test":

National Standards for food, clothing and other items apply nationwide. Taxpayers are allowed the total National Standards amount for their family size, without questioning the amount actually spent.

National Standards have also been established for minimum allowances for out-of-pocket health care expenses. Taxpayers and their dependents are allowed the standard amount on a per person basis, without questioning the amount actually spent. 

Maximum allowances for housing and utilities and transportation, known as the Local Standards, vary by location. In most cases, the taxpayer is allowed the amount actually spent, or the local standard, whichever is less.

Generally, the total number of persons allowed for necessary living expenses should be the same as those allowed as exemptions on the taxpayer’s most recent year income tax return.

If the IRS determines that the facts and circumstances of a taxpayer’s situation indicate that using the standards is inadequate to provide for basic living expenses, we may allow for actual expenses. However, taxpayers must provide documentation that supports a determination that using national and local expense standards leaves them an inadequate means of providing for basic living expenses.

Copied from Department of Justice, Trustee, website on October 17, 2014

Because the analysis is so fluid, you will want to analyze your monthly expenses with a bankruptcy attorney.  As a starting point, here is the present national standards for food clothing and other items:  

Copied from Department of Justice, Trustee, website on October 17, 2014

Sometimes, even when you "flunk" the means test, the court could consider your specific circumstances that will allow you to file chapter 7 bankruptcy.  A common one relates to permitting additional expenses that relate to treating a medical condition.  Bottom line, consult with an expert to effectively navigate the "means test".