Chapter 7 Bankruptcy Law

By: Damian Sofsian

Under the grant of authority given by Article I, Section 8, of the United States Constitution, Congress enacted the "Bankruptcy Code" in 1978, which is codified as title 11 of the United States Code. From October 17, 2005, the courts must charge a $220 case filing fee, a $39 miscellaneous administrative fee, and a $15 trustee surcharge, which must be paid to the clerk of the court upon filing. However, individual debtors may pay in installments with the court's permission.

To qualify for relief under chapter 7 of the Bankruptcy Code, the debtor can be an individual or business entity. This eligibility is discussed under U.S.C 11 subsections 101(41), 109(b). An individual may not be a debtor unless he or she has received proper credit counseling within 180 days before filing. If the 'current monthly income' of the debtor is more than the state median, the Bankruptcy Code requires application of a 'means test'. With the petition, the debtor must also file with the court schedules of assets and liabilities, current income and expenditures, unexpired leases, a statement of financial affairs and a copy of the tax returns. Also, debtor must provide a list of all creditors and claims, the source, amount, and frequency of the debtor's income, a list of all of the debtor's property and a detailed list of the debtor's monthly living expenses.

Under the U.S.C. 11 Section 362, the 'Automatic Stay' on collection action is put so that creditors may not initiate or continue lawsuits or demand payments. U.S.C. 11 section 721 and 726 discusses the role of the impartial trusty who administers the case, operates the business of debtor and liquidates the debtor's nonexempt assets. The trustee holds a meeting of creditors between 20 and 40 days after the petition is filed. At the meeting, the trustee puts the debtor under oath, and both the trustee and creditors may ask questions. The debtor must cooperate with the trustee and provide any documents that the trustee requests.

A discharge given according to U.S.C 11 section 727, releases individual debtors from personal liability for most debts and prevents the creditors owed those debts from taking any collection actions against the debtor. The court may revoke a chapter 7 discharge on the request of the trustee or creditor, if the debtor obtained the discharge through fraud.

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