Accordingly, the debtor is not particularly interested in the trustee's disposition of the estate assets, except with respect to the payment of those debts which for some reason are not dischargeable in the bankruptcy case.
The individual debtor's primary concerns in a chapter 7 case are to retain exempt property and to receive a discharge that covers as many debts as possible. A discharge releases individual debtors from personal liability for most debts and prevents the creditors owed those debts from taking any collection actions against the debtor. Because a chapter 7 discharge is subject to many exceptions, debtors should consult competent legal counsel before filing to discuss the scope of the discharge.
Generally, excluding cases that are dismissed or converted, individual debtors receive a discharge in more than 99 percent of chapter 7 cases. In most cases, unless a party in interest files a complaint objecting to the discharge or a motion to extend the time to object, the bankruptcy court will issue a discharge order relatively early in the case — generally, 60 to 90 days after the date first set for the meeting of creditors.
The grounds for denying an individual debtor a discharge in a chapter 7 case are narrow and are construed against the moving party. Among other reasons, the court may deny the debtor a discharge if it finds that the debtor: failed to keep or produce adequate books or financial records; failed to explain satisfactorily any loss of assets; committed a bankruptcy crime such as perjury; failed to obey a lawful order of the bankruptcy court; fraudulently transferred, concealed, or destroyed property that would have become property of the estate; or failed to complete an approved instructional course concerning financial management.
Secured creditors may retain some rights to seize property securing an underlying debt even after a discharge is granted. Depending on individual circumstances, if a debtor wishes to keep certain secured property such as an automobile , he or she may decide to "reaffirm" the debt. A reaffirmation is an agreement between the debtor and the creditor that the debtor will remain liable and will pay all or a portion of the money owed, even though the debt would otherwise be discharged in the bankruptcy.
In return, the creditor promises that it will not repossess or take back the automobile or other property so long as the debtor continues to pay the debt. If the debtor decides to reaffirm a debt, he or she must do so before the discharge is entered. The debtor must sign a written reaffirmation agreement and file it with the court. The Bankruptcy Code requires that reaffirmation agreements contain an extensive set of disclosures described in 11 U.
Among other things, the disclosures must advise the debtor of the amount of the debt being reaffirmed and how it is calculated and that reaffirmation means that the debtor's personal liability for that debt will not be discharged in the bankruptcy. The disclosures also require the debtor to sign and file a statement of his or her current income and expenses which shows that the balance of income paying expenses is sufficient to pay the reaffirmed debt.
If the balance is not enough to pay the debt to be reaffirmed, there is a presumption of undue hardship, and the court may decide not to approve the reaffirmation agreement. Unless the debtor is represented by an attorney, the bankruptcy judge must approve the reaffirmation agreement. If the debtor was represented by an attorney in connection with the reaffirmation agreement, the attorney must certify in writing that he or she advised the debtor of the legal effect and consequences of the agreement, including a default under the agreement. The attorney must also certify that the debtor was fully informed and voluntarily made the agreement and that reaffirmation of the debt will not create an undue hardship for the debtor or the debtor's dependants.
The Bankruptcy Code requires a reaffirmation hearing if the debtor has not been represented by an attorney during the negotiating of the agreement, or if the court disapproves the reaffirmation agreement. The debtor may repay any debt voluntarily, however, whether or not a reaffirmation agreement exists.
An individual receives a discharge for most of his or her debts in a chapter 7 bankruptcy case. A creditor may no longer initiate or continue any legal or other action against the debtor to collect a discharged debt. But not all of an individual's debts are discharged in chapter 7. Debts not discharged include debts for alimony and child support, certain taxes, debts for certain educational benefit overpayments or loans made or guaranteed by a governmental unit, debts for willful and malicious injury by the debtor to another entity or to the property of another entity, debts for death or personal injury caused by the debtor's operation of a motor vehicle while the debtor was intoxicated from alcohol or other substances, and debts for certain criminal restitution orders.
The debtor will continue to be liable for these types of debts to the extent that they are not paid in the chapter 7 case.
Debts for money or property obtained by false pretenses, debts for fraud or defalcation while acting in a fiduciary capacity, and debts for willful and malicious injury by the debtor to another entity or to the property of another entity will be discharged unless a creditor timely files and prevails in an action to have such debts declared nondischargeable. The court may revoke a chapter 7 discharge on the request of the trustee, a creditor, or the U. Main content Chapter 7 - Bankruptcy Basics This chapter of the Bankruptcy Code provides for "liquidation" - the sale of a debtor's nonexempt property and the distribution of the proceeds to creditors.
Alternatives to Chapter 7 Debtors should be aware that there are several alternatives to chapter 7 relief. Background A chapter 7 bankruptcy case does not involve the filing of a plan of repayment as in chapter Chapter 7 Eligibility To qualify for relief under chapter 7 of the Bankruptcy Code, the debtor may be an individual, a partnership, or a corporation or other business entity. How Chapter 7 Works A chapter 7 case begins with the debtor filing a petition with the bankruptcy court serving the area where the individual lives or where the business debtor is organized or has its principal place of business or principal assets.
In order to complete the Official Bankruptcy Forms that make up the petition, statement of financial affairs, and schedules, the debtor must provide the following information: A list of all creditors and the amount and nature of their 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, i. Role of the Case Trustee When a chapter 7 petition is filed, the U. The Chapter 7 Discharge A discharge releases individual debtors from personal liability for most debts and prevents the creditors owed those debts from taking any collection actions against the debtor.
Notes The "current monthly income" received by the debtor is a defined term in the Bankruptcy Code and means the average monthly income received over the six calendar months before commencement of the bankruptcy case, including regular contributions to household expenses from nondebtors and including income from the debtor's spouse if the petition is a joint petition, but not including social security income or certain payments made because the debtor is the victim of certain crimes.
To determine whether a presumption of abuse arises, all individual debtors with primarily consumer debts who file a chapter 7 case must complete Official Bankruptcy Form B22A, entitled "Statement of Current Monthly Income and Means Test Calculation - For Use in Chapter 7. An involuntary chapter 7 case may be commenced under certain circumstances by a petition filed by creditors holding claims against the debtor. Each debtor in a joint case both husband and wife can claim exemptions under the federal bankruptcy laws.
In North Carolina and Alabama, bankruptcy administrators perform similar functions that U.
These duties include establishing a panel of private trustees to serve as trustees in chapter 7 cases and supervising the administration of cases and trustees in cases under chapters 7, 11, 12, and 13 of the Bankruptcy Code. The bankruptcy administrator program is administered by the Administrative Office of the United States Courts, while the U.
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These are intended to give illustrative guidance on the kind of situations in which the regime anti-avoidance rules may, or may not, apply — always subject to the particular facts and context.
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In particular, it would be necessary to take account whether there are other factors in play. Arrangements may be aimed at eliminating or reducing credits brought into account by a lender company in respect of economic benefits receivable as or in lieu of interest; assuming the evidence shows this to have been a main purpose of the arrangements, they are likely to amount to relevant avoidance arrangements. The discrepancy between amounts brought in to account under Part 5 and the economic reality would be an outcome within SD 1 a , so prima facie the exclusion in SC 4 will not apply.
In such a case, the appropriate counteraction is likely to be the reinstatement of the full amounts of the credits that would have been brought into account by the lender in the absence of the arrangements. As regards the borrower, provided that debits brought into account properly reflect the amounts and timing of the interest payable under the loan, and the company bears the economic cost of the interest, no counteraction under the regime anti-avoidance rule will be appropriate. However, if the borrower entered into the loan for a non-commercial purpose including the facilitation of tax avoidance by the lender , the unallowable purpose rule in S may operate to disallow some or all of the debits.
To avoid being taxed it may transfer the loan to a special purpose vehicle in exchange for the issue of shares for the value of the loan.
It may claim that no profit is therefore recognised on the disposal, even though it receives valuable consideration. SA makes clear that the loan relationships regime is intended to tax all profits from loan relationships except where special provision is made. Through this arrangement the company has sought to frustrate that principle. There is no Part 5 provision that is intended to permit the tax advantage which would arise in this case, so the SC 4 exclusion would not be in point, and SB is likely to apply.
If the arrangements have a main purpose of increasing or decreasing amounts recognised as items of profit or loss so that the Part 5 or Part 7 credits or debits derived from them are affected, then the regime anti-avoidance rules are likely to apply.
esanesbit.tk SD 1 c indicates that the SC 4 exclusion is unlikely to apply. A company within a group may hold a creditor loan relationship which is standing at a profit and may transfer the loan to another group company.