Most of our clients file a Chapter 7 bankruptcy, and this is the most common bankruptcy case. In a Chapter 7 case, the bankruptcy court appoints a trustee who will investigate whether the debtor has any non-exempt assets that can be sold to repay debt and whether the debtor has enough income to repay debt in a Chapter 13 bankruptcy. Where there is enough income, the bankruptcy court can convert a Chapter 7 case to a Chapter 13 case.

To start a bankruptcy case, the debtor files a petition with the court that includes detailed information listed on different attached schedules that describe the debtor’s income, assets, and expenses. The debtor must also file a comprehensive statement of financial affairs covering the previous two years and provide certain required backup documentation.The trustee examines this information carefully and the trustee’s office also conducts its own investigation.

If the bankruptcy trustee determines that the Chapter 7 debtor has no non-exempt assets and does not have enough income to repay debt in a conversion to a Chapter 13 bankruptcy case, the bankruptcy court usually grants the debtor a discharge, which is a court order that absolves the debtor of the legal obligation to repay dischargeable debts. Typical dischargeable debts include credit card (consumer) debt, medical bills, cash advances, business debt, and many court judgments.

Debtors should understand, however, that some debts are not dischargeable in a Chapter 7 bankruptcy. Non-dischargeable debts include student loans, domestic support obligations such as child support or maintenance (sometimes called alimony), debts arising from fraud or criminal conduct, debts resulting from driving under the influence, and certain taxes.

If your debts are mostly non-dischargeable, you might consider filing under Chapter 13, which affords the opportunity to repay debts over time.

Chapter 7, like Chapter 13, includes an automatic stay. The automatic stay immediately stops creditors from taking most collection actions against the debtor. Creditors subject to the automatic stay are prohibited from calling, writing, filing a lawsuit, continuing to litigate an existing lawsuit, or garnishing your wages.

Remember, Chapter 7 is a liquidation bankruptcy. The law allows you to exempt certain assets, but non-exempt assets will be sold by the bankruptcy trustee to repay your creditors. If you do not disclose an asset or if you have assets worth more than the legal exemptions, you might risk losing those assets in a Chapter 7 bankruptcy.
 

In a Chapter 13 bankruptcy, debtors file detailed financial information as in a Chapter 7. However, in Chapter 13, debtors agree to repay all or part of their debt over a period of 36 to 60 months. The debtor proposes a formal plan to repay creditors, which must be confirmed by the bankruptcy court. The debtor then makes one monthly payment to the bankruptcy trustee. Chapter 13 can be used to stop foreclosure, auto repossession, and tax levies and garnishments and to repay these debts over time. To save a home with a Chapter 13 filing, the plan payment must be enough cover current monthly mortgage payments, the overdue mortgage payments, and administrative and attorney’s fees.

Unfortunately, and for a variety of reasons, many debtors in Chapter 13 fail to keep up with their plan payments. However, even in such cases Chapter 13 can be helpful in giving the debtor more time or to convert the case to Chapter 7.
 

Although many bankruptcy cases do not involve litigation, sometimes certain matters are actively litigated in bankruptcy court. We have successfully represented clients in connection with adversary complaints, motions, objections, and other bankruptcy court filings in both Chapter 7 and Chapter 13 cases, in matters involving such disparate areas as child support issues and real estate claims.

If you have questions about bankruptcy rights in Washington, our family lawyers can answer your questions and explain your rights. Contact us in Seattle, Washington, to schedule a consultation.

Located in the Capitol Hill District, the Olympic Law Group has convenient and accessible free parking and wireless access throughout the office. We have a friendly office that provides a high level of service for each and every client.

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