Hendricks Law Firm PLLC

Individuals may file for bankruptcy relief under Chapters 7, 11, 12 or 13 of the United States Bankruptcy Code. At Hendricks Law Firm PLLC, we concentrate on filing bankruptcy petitions under Chapters 7 and 13. If Attorney Hendricks determines that you should file under Chapters 11 or 12, she will refer you to a law firm that specializes in filing under those chapters.

The ultimate goal of bankruptcy is the discharge. A bankruptcy discharge releases the debtor from personal liability for certain types of debts, including credit card debts.

Regardless of the chapter, some types of debts will not be discharged.
For example, domestic support obligations, many tax obligations, and most school loan obligations are not dischargeable. Furthermore, if you elect to reaffirm a debt in order to keep certain property, such as your house or your car, the reaffirmed debt will not be discharged in bankruptcy.   

The trustee is the person who monitors the transactions and the conduct of the parties in bankruptcy. In a Chapter 7 bankruptcy, the trustee will determine which of the debtor's assets, if any, are sold in order to pay the creditors. In a Chapter 13 bankruptcy, the debtor sends all plan payments to the trustee, whose office then distributes the funds according to the plan. (The trustee has many more duties and obligations that are beyond the scope of this synopsis.)

Approximately 30 days after filing a Chapter 7 petition, and 50 days after filing a Chapter 13 petition, the trustee holds a First Meeting of Creditors (often referred to as a "341 meeting"). The debtor's attendance at this meeting is mandatory. If the debtor fails to attend, his bankruptcy case will likely be dismissed.

At the 341 meeting, the debtor is placed under oath and may be questioned by the trustee, or any other interested party, regarding the information set forth in his petition. As long as the debtor has disclosed all applicable information in an accurate and complete manner, this question-and-answer session should be simple and brief.

In most bankruptcy cases in which the debtor is represented by an attorney, this meeting is the only time that the debtor is required to make an appearance. Despite the name, creditors rarely appear at these meetings.    

All people who file bankruptcy are permitted to claim some of their property as exempt, which protects it from unsecured creditors. If any part of the debtor's property is claimed as exempt, the amount of that exemption cannot be used to satisfy a debt, even if the property is sold. (The trustee might choose to sell such property if its value exceeds the amount of the claimed exemption and any security interest or lien attached to the property. In such case, the debtor is paid the amount of his exemption.) Exemptions play a role in both Chapters 7 and 13, but the role is much more significant under Chapter 7.

Chapter 7 is often referred to as a straight bankruptcy or liquidation. The idea behind Chapter 7 is that the trustee will sell the debtor's non-exempt property in order to pay the debtor's unsecured creditors. The proceeds from these sales typically are not sufficient to pay all unsecured creditors in full; when that happens, the trustee distributes to these creditors a pro rata share of the sale proceeds. Often, the value of the non-exempt property is so low that the trustee decides that none of the debtor's property is worth selling. These cases are called "no asset" cases; the result is that the debtor's unsecured creditors receive nothing and the debtor keeps all of his property.

Many people, but not all, are permitted to file bankruptcy under Chapter 7. In order to do so, a debtor must pass the "means test." The means test takes into consideration median family income, along with the debtor's actual household income and allowable expenses. A detailed explanation of the means test is beyond the scope of this summary, but remember that, even if a person fails the means test and is not permitted to file under Chapter 7, he may still file under Chapter 11 or 13.

An uncomplicated Chapter 7 bankruptcy case will take approximately 90 days from the date of filing to the date of discharge.  

Chapter 11 is typically used by businesses seeking to develop a payment plan in an attempt to reorganize their finances. The only time an individual wanting to reorganize is required to file under Chapter 11 is when the individual has unsecured debts of at least $336,900 or secured debts of at least $1,010,650. Since not many people have debts reaching these threshold amounts, almost all individuals seeking to reorganize will file under Chapter 13.  

Chapter 12 is reserved for family farmers and family fishermen.

Chapter 13 is sometimes referred to as wage earner's bankruptcy. The idea behind Chapter 13 is that the debtor will propose and abide by a three to five year payment plan. The plan must allow for full payment of secured and priority claims. Unsecured creditors need not be paid in full, as long as they receive as much under the plan as they would have received if the debtor filed under Chapter 7. (The debtor must claim exemptions, not to preserve property, but for the purpose of determining if the Chapter 13 plan will pay at least as much as a Chapter 7 "liquidation.") Typically, all of the debtor's disposable income will be paid into the plan every month. The trustee's office collects and distributes the funds.

Some debtors are required to file under Chapter 13 because they do not pass Chapter 7's means test. Others elect to file under Chapter 13 because they are behind in their mortgage and/or car payments, and filing under Chapter 13 is the only way they can catch up on their payments. Still others elect to file under Chapter 13 in order to take advantage of its somewhat more generous discharge provisions.

Because the plan must last from three to five years, the debtor remains in bankruptcy for a significant period of time.

A debtor who files bankruptcy must complete a credit counseling course within 180 days before filing. (There are exceptions to this requirement, but they are rarely applicable.) The Court will dismiss the bankruptcy case if the debtor fails to comply with this rule.

Before receiving a discharge, the debtor must take a financial management course. The Court will not grant a discharge until this course is completed.

Most agencies charge approximately $50 for each of these courses. They typically charge joint debtors the same fee as a single debtor.     

For a list of certified credit counseling and financial management courses for the Western District of North Carolina, click here.  To see which North Carolina counties comprise the Western District, click here.  

Everyone who files a bankruptcy petition is required to pay the court a filing fee. (Exceptions apply to this rule, but they are rarely applicable.)

The current fees for filing a bankruptcy petition are as follows:

Chapter 7:      $299
Chapter 13:     $274

Click here to see a complete list of court filing fees.

Attorneys' fees vary depending on many factors, including, but not limited to, the following:

• the geographical area
• the chapter under which the debtor is filing (Chapter 13 is more time consuming for the attorney, and therefore requires a higher fee) 
• the number of creditors
  
• the debtor's desire for a reaffirmation agreement or a redemption
• whether the attorney is taking on a case that has been previously mismanaged by a pro se debtor (A pro se debtor is one who represents himself.)
• the general simplicity or complexity of the particular case
  

At Hendricks Law Firm PLLC, our goal is to provide the highest quality services at competitive prices. During your initial consultation, Attorney Hendricks will quote you a fair and reasonable fee.