SELF-HELP LEGAL KITS
The Divorce Store®CHAPTER 7 BANKRUPTCY KIT
INTRODUCTION to the CHAPTER 7 BANKRUPTCY KIT | ||||
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| The Divorce Store® Chapter 7 Bankruptcy Kit is published in accordance with Title 11 Chapter 7 of the Bankruptcy Code and the Federal Rules of Bankruptcy Procedure, as amended. In past years, the stigma of Bankruptcy was such that many impoverished debtors chose to lose their meager assets rather than pursue relief under the Bankruptcy Laws. A substantial majority of these individuals were discouraged from filing Bankruptcy because of the high legal fees charged by attorneys. This Bankruptcy Kit does eliminate this obstacle by providing, at a low cost, this do-it-yourself Kit with everything needed to file and complete an action under Chapter 7 of the Bankruptcy Code. And even though filing for Bankruptcy today, under the present economic atmosphere, carries no measurable stigma, it should nevertheless not be taken lightly without seriously considering other alternatives. The Bankruptcy Code itself provides for various forms of equitable relief. For example, this kit includes all of the Forms required to file an action under Chapter 7 of the Code, the effect of which is to discharge all unsecured debts and manage or compromise the secured debts; while under Chapter 13, the relief is of a broader scope, but it does require that the debtor have regular income sufficient to fund a workable repayment plan. Chapter 13 can provide relief that is not available under Chapter 7; namely, it allows the debtor to pay past-due payments of, for example, a home mortgage, for a period equal to the term of the Chapter 13 Plan, which can be up to 5 years. Also, debts owed on personal property can be repaid in an amount equal only to the market value of the property. In other words, if there are past-due payments on any long term contracts and/or a motor vehicle loan whose balance exceeds the market value of the vehicle, then Chapter 13, rather than Chapter 7 should be considered. There are, however, some limitations that restrict the use of Chapter 13, and they are: The unsecured debts can not exceed $250,000, nor can the secured debts exceed $750,000. Also, Chapter 13 cannot be used to extend payments on a matured balloon note secured by a mortgage or deed or trust on the debtor's principal residence. This restriction also applies in Chapter 11 cases. Chapter 11 is another Chapter that can be considered when faced with an unmanageable debt load. The relief available under Chapter 11 is as broad as the means available to accomplish either a reorganization or liquidation of both secured and unsecured debts. Under the 1994 amendment to the Bankruptcy Code, provisions were added that provide simplified procedures for filing by small businesses with debts under $2,000,000. The one factor that makes a Chapter 11 filing stand out from both a Chapter 7 and Chapter 13 is the filing fee of $800.00, while the filing fee for Chapter 7 is $175 and Chapter 13 is $160 (October, 1995). There is another consideration that may interest you as you prepare to file the Bankruptcy action, and that is, the use of a so-called "Chapter 20" action, which is the filing first of a Chapter 7 action to wipe out the unsecured debts, then filing a Chapter 13 action to manage past-due house payments. This type of action was approved by the United States Supreme Court in 1991, in the case of Johnson v. Home State Bank, 111 S.Ct. 2150, 115 L.Ed.2d 66. If you think utilizing this type of dual action will be of benefit to you, we do publish The Divorce Store® Chapter 13 Bankruptcy Kit in addition to The Divorce Store® Chapter 7 Bankruptcy Kit. If this overview of the various Chapters has provided enough information to enlighten an informed interest in considering what debt relief is available under each of the three Chapters, then the purpose of this introduction has been accomplished. It is, however, important that you read all of the material, included in this text is not only briefly written, but written for understanding by individuals without any experience in law, especially Bankruptcy Law. In Chapter Five, there is a complete Glossary Of Words commonly used in all Bankruptcy actions; therefore, you may want to review these words in-depth before you start preparing the Official Forms since the knowledge of their meanings will provide you with a good understanding of how the Bankruptcy system works. As a final note, even though all of the Official Bankruptcy Forms included in this kit have been approved by the United States Judicial Conference and adopted by the United States Supreme Court, the local Bankruptcy Courts can make rules that require other forms in addition to these Official Forms. If this happens in the District where you will file your action, the Court will either provide these additional forms or you will be instructed as to how to obtain them. A very good example of these Local Rule requirements can be seen in Los Angeles County, California, where it is required that the Bankruptcy Forms be submitted with Blue Manuscript Covers backing each Form (a very ancient practice). If you have any questions or comments in these regards, please feel free to call or write the publisher as indicated in this text.
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