Chapter 7 In A Nutshell


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Chapter 7 In A Nutshell
  Moderator Benjamin A. Stolz, Esq., is trainer, speaker, educator, writer and attorney with over 20 yearsexperience practicing consumer bankruptcy and business law, managing and advising small businesses.He is a serial entrepreneur, having founded or played an executive role in successfully launching half adozen new startups providing professional services ranging from SaaS solutions to Legal ProcessOutsourcing. Frequently a co-founder or key executive, he has served in various corporate development,strategic advisory, and business development roles at the Executive Level, including General Counsel andinterim CEO. Ben received his BA from the University of South Florida, with Departmental Honors, and aJD from Southern Methodist University. He has been admitted to practice in Texas both before theSupreme Court of Texas, all lesser Texas courts, as well as the United States District Courts for theNorthern and Eastern Districts of Texas. Ben is a member of the National Association of ConsumerBankruptcy Attorneys (NACBA), the American Bankruptcy Institute (ABI), Association of Litigation SupportProfessionals (ALSP), the American Bar Association (ABA), a proud graduate of the Max GardnerBankruptcy Bootcamp, and a frequent guest panelist at Consumer Bankruptcy CLE events. As a result of his ongoing commitment to continuing legal education, Ben was also admitted in 2009 to the College of the State Bar of Texas.  Disclaimer This is a Continuing Legal Education (CLE) presentation, and it is not legal advice. This presentation wasprepared for information purposes only for other lawyers only and deals with hypothetical or historicalsituations. The information is certainly not intended and should not in any way be construed as legaladvice. Your receipt of this information does not in any way create an attorney-client relationship andcannot substitute for obtaining legal advice from an attorney. The presenters make no claim about thecorrect interpretation of any law discussed in this presentation. The presenters do not make any claimabout what the correct course of action might be in a particular matter. Although every effort has beenmade to assure the accuracy of the information in this presentation, the presenters also do not make anyclaim that the information contained in this presentation is error free.   1 I. The Options for an Individual Debtor An individual may file a bankruptcy petition under four different chapters of the Bankruptcy Code: Chapter 7, Chapter 11,Chapter 12, and Chapter 13. Each of the chapters defines a particular type of bankruptcy case, with its own eligibilityrequirements.Of these four types of bankruptcy cases, only one—Chapter 7—involves a liquidation of the debtor’s assets. The essentialfeatures of a Chapter 7 case are: ã   Only certain debtors are permitted to proceed in Chapter 7. The debtor must either pass the so-called “means test” orhave an income less than the median income in the debtor’s state for the same family size. Under the means test, forwhich the Bankruptcy Code prescribes a detailed formula, a debtor must have less than a specified amount in availableincome (which, under the circumstances, ranges from $117.08 to $195.41 per month) to pay unsecured, nonprioritycreditors. There are also several other grounds on which a debtor may be excluded from Chapter 7. ã   The debtor surrenders his or her assets that have liquidation value—value after taking into account existing liens andany exemption the debtor is able to claim—in exchange for a discharge of many, but not all, of the debtor’s unsecureddebts. A bankruptcy trustee sells these assets and distributes the proceeds to creditors. The debtor is able to keep allthe property that is exempt, for example, under California law, other property that the Bankruptcy Code protects, andany property that the trustee doesn’t believe has enough value to worry about. ã   In most instances, the liens on secured debts are not voided and pass through bankruptcy unaffected if the debtorretains the collateral for the debt. Therefore, the creditor retains the ability to repossess the collateral after the case isover, although the debtor’s personal liability is discharged, so the creditor cannot attempt to collect any deficiency fromthe debtor personally, unless the debtor reaffirms the debt.
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