Chapter 7 Bankruptcy in Las Vegas
In every chapter 7 bankruptcy case, an individual known as a “bankruptcy trustee” is appointed to manage the case. The primary purpose of a bankruptcy trustee is to review the case to see if any of the debtor’s assets are “non-exempt”. If any exist, such non-exempt assets are surrendered to the trustee, who liquidates (sells) the assets and uses the sale proceeds to make a one-time payment to the debtor’s creditors.
Fortunately, the Bankruptcy Code and Nevada state law allow individuals in Chapter 7 to keep most of their property as being “exempt” from the trustee. In almost every one of our individual chapter 7 cases, we are able to exempt all of our client’s assets, meaning that they get to keep all of their assets. Nevada has very generous exemptions, but on occasion some clients have excessive or expensive assets, such as a second house or multiple cars, that might not be exempt. If you’re concerned about whether your property is exempt, please call us for a consultation.
Advantages of Chapter 7
Chapter 7 bankruptcy cases are typically fast. For uncomplicated cases, the duration of a case is usually about 4 months, from start to finish.
When a bankruptcy case is filed, creditors are prohibited from continuing collections actions against you, including all lawsuits, garnishments, and collections phone calls. This prohibition is called an “automatic stay” and provides immediate relief to clients who are tired of being hounded by creditors.
In a Chapter 7 bankruptcy, debtors who are current on their house mortgages almost always get to keep their house and car (if they choose to keep them), providing that they continue to make timely payments on their mortgage and/or car payment.
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.
Individuals whose debts are primarily consumer debts have to pass a “means test” to qualify for chapter 7. If the debtor’s current monthly income is more than the state median for their household size, then chapter 7 is not available, and debtors must file chapter 13 or chapter 11 instead. To see if your household income is above or below the threshold to qualify for chapter 7, please call our office.
Individuals whose debts are primarily business debts do not have to pass the means test.
Subject to the means test for individual debtors, chapter 7 is available regardless of how much you owe.
How Chapter 7 Bankruptcy Works
Before a bankruptcy case is filed, you would come to our office and have a kick-off meeting. We generally ask you bring to that meeting your driver’s license, social security card, and your two most recent tax returns. At that meeting, we will discuss your situation, and pull your credit report, and we will describe the process for you in detail.
A married couple (including domestic partners) may file bankruptcy together, using what is called “joint petition”, such that only one bankruptcy case is created for the couple. Married couples also get to “stack” many of their exemptions, so that the couple gets to have twice as many non-exempt assets as a single filer. A married person can also file for bankruptcy without their spouse. However, in that instance, the debtor must still list all of the assets of the entire household, and also all of the household income, in his or her schedules. Also, that debtor would only get one set of exemptions. Call our office to discuss the implications of filing without your spouse.
Before filing the case, we also obtain from you key financial documents, such as your bank statements, and paystubs. These documents are provided to the trustee and are reviewed to ensure that the schedules are consistent with reality, and that the debtor does qualify for chapter 7 bankruptcy in Nevada.
You also have to take one on-line class called “credit counseling” before the case is filed, and also another class after you filed called “debtor education”. Both classes take about an hour to complete, and are easy. Both classes can also be taken by telephone.
Preparing to file for chapter 7 bankruptcy in Las Vegas is generally not difficult, but can take a little time to accomplish. We obtain from you a list of your assets, and income, and your expenses, and generally get a complete financial snapshot of your life, so that we can prepare the documents for the Bankruptcy Court. These documents are referred to as the “petition, schedules, and statement of financial affairs”. We fill out all of those papers and review them with you in detail before the case is filed with the Bankruptcy Court.
Role of the Case Trustee
Once a chapter 7 bankruptcy case is filed, a person called a “trustee” is appointed to administer the case. There are several chapter 7 trustees in Las Vegas, each of which manages thousands of bankruptcy cases per year.
The primary role of a chapter 7 trustee is to identify and sell any non-exempt property of a Debtor. As explained above, Nevada has very generous exemptions, such that debtors in almost all (98%+) Nevada chapter 7 bankruptcy cases are fully exempt. That means that almost all Nevada chapter 7 debtors get to keep all of their property, including their residence and car, and do not have to turn anything over to the trustee assigned to their case.
In the small number of individual chapter 7 cases in which non-exempt property exists, which is about 2% of all cases filed in Nevada, the debtor is obligated to turn the non-exempt property to the trustee. Failure to cooperate with the trustee in turning property over can result in a denial of the debtor’s discharge of debts.
When non-exempt property is turned over to the trustee, the trustee will sell the property, which is also referred to as a “liquidation.” If the non-exempt asset is real property, the trustee will usually hire a realtor to do so. If it is personal property, the trustee usually will hire an auctioneer and auction the property off.
In certain circumstances, the trustee will allow a debtor to purchase the property back directly from the trustee, rather than having it go to auction. In such instances, the property will be appraised (at debtor’s cost) to determine the fair market value of the property.
The trustee determines what assets are exempt or not exempt based on a review of the debtor’s schedules of assets and exemptions, which are filed at the commencement of the bankruptcy case. The asset schedules are compiled by the bankruptcy attorney using information you provide about your assets. The bankruptcy lawyer then produces the schedule of exemptions, to exempt your assets as much as possible. Nevada exemptions law can be complicated, especially for debtors who have substantial or complex financial assets. A good Nevada bankruptcy lawyer can help maximize the exemptions that apply, so that you get to keep most or all of your property.
The trustee’s review of the schedules takes place at a meeting called a “trustee’s meeting” or a “341 meeting”, which refers to Section 341 of the United States Bankruptcy Code that requires such a meeting to be held. At the 341 meeting, the trustee swears a debtor in, and asks the debtor under oath whether all of the debtor’s assets have been listed in the schedules. This is a mandatory meeting for a debtor. For joint cases in which both husband and wife are debtors, then both must attend. The meeting is usually very brief, lasting 3-4 minutes. At Atkinson Law, attorney Robert Atkinson will be there with you at the 341 meeting, to represent you before the trustee. At many other Las Vegas bankruptcy law firms, they outsource that attorney, and the attorney at that 341 meeting is someone you have never met before! That will not happen if you choose Atkinson Law as your bankruptcy counsel.
At the conclusion of the 341 meeting, the trustee determines whether the case has fully-exempted assets (and thus no assets are available for liquidation). In such “no-asset” cases, the bankruptcy case closes out shortly after the discharge is entered. In cases with non-exempt assets, the trustee will sell/liquidate that property. Once all of the non-exempt property is liquidated, then the trustee makes a one-time distribution of money to creditors of the debtor, as a partial payback for their losses.
Notably, exemptions only apply to people. Business chapter 7 debtors do not get any exemptions for assets – a bankrupt company in chapter 7 has to turn all business property over to the trustee.
Lastly, a chapter 7 bankruptcy trustee also is obligated to keep an eye out for fraud. Very occasionally, debtors attempt to conceal assets from the trustee and creditors, by failing to disclose assets. This failure to disclose assets is considered to be bankrtupcy fraud, and has very serious consequences. A debtor’s discharge can be denied, and in certain circumstances such bankruptcy fraud can be deemed to be criminal activity under applicable Federal law. Accordingly, you should always disclose all of your assets on your schedules, and let a good chapter 7 bankruptcy attorney in Las Vegas can exempt them as much as possible.
Reaffirmation of Debt
If a debtor wishes to keep certain secured property with a loan on it, such as a house or automobile, the debtor can agree to “reaffirm” the debt. A reaffirmation is an agreement between the debtor and the creditor in which the debtor agrees to remain liable on the debt, 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 house, so long as the debtor continues to pay the debt. Nevada law on reaffirmations of vehicle loans is complex; in most circumstances, a debtor can keep the vehicle and keep making payments on it, without the signing back up for the loan again via a reaffirmation. The decision to enter a reaffirmation agreement should be made using legal advice from your chapter 7 bankruptcy attorney in Las Vegas.
The Chapter 7 Discharge
The primary reason that individuals file for chapter 7 bankruptcy in Las Vegas is to get rid of debt and get a fresh start on life. Legally, the way debt is terminated in a chapter 7 bankruptcy case is through a document called a “discharge”. The discharge paper is typically issued 3-4 months after a bankruptcy case is filed. Once that discharge is issued, you no longer are legally liable on any discharged debt.
Not all debt can be discharged. Typically, most regular consumer debt, such as credit cards and medical bills, can be discharged. However, certain types of debt cannot be discharged. The major types of non-dischargeable debt are: (i) recent unpaid income taxes; (ii) court-ordered child support or alimony obligations; and (iii) student loans.
In addition, recent spending splurges by a debtor in the 90 days prior to filing bankruptcy may not be discharged. In general, luxury purchases more than $500 per credit card, or cash advances more than $750 per credit card, are deemed not dischargeable.
As you might suspect, reaffirmed debt is also not discharged, because a reaffirmation agreement results in the debtor agreeing to continue to have liability for the secured loan.
Section 532 of the U.S. Bankruptcy Code also allows creditors to object to the discharge of the debt owed to that creditor, in certain circumstances. In particular, if a creditor loaned money to a debtor based on fraudulent misrepresentations, then that debt might not be discharged.
Also, Section 727 of the U.S. Bankruptcy Code allows a creditor, the chapter 7 trustee, or the United State Trustee to object to the issuance of the entire discharge, in certain circumstances including failure to turn over non-exempt property, failure to adequately keep records or explain a loss of assets; committing perjury, concealing property, failure to cooperate with the trustee, etc. Ask a good Las Vegas bankruptcy lawyer if you are concerned that someone might seek a denial of your discharge.
Discharges are only issued to people who file for chapter 7. Discharges are not issued in business chapter 7 bankruptcy cases. The bankrupt company simply ceases operations, and all assets are liquidated by the trustee.
We have flat rates for our chapter 7 bankruptcy services, which *include* the $335 government filing fee, and credit report fee, and the fees for the Credit Counseling and the Debtor Education classes.
We have one base rate for single persons, one for married persons, and one for businesses. Almost all of our clients are charged our base rate. We charge more than the base rate in circumstances in which a lot of complexities exist. For example, for individual debtors who own a business, and want to keep that business alive during their personal bankruptcy, we will charge more because of the additional work involved.
We do not post our fees online. Please call our office to discuss pricing; it is a quick phone call and we can discuss your situation to see if bankruptcy is even the right decision for you.
Lastly, beware of certain Las Vegas attorneys offering to file your chapter 7 case for $500. These unscrupulous attorneys fail to tell you in their advertising that you have to separately pay for the $335 government filing fee, and Credit Counseling. Even worse, they don’t tell you in their advertisement that you have to sign another fee agreement with them after the bankruptcy is filed or else they will drop you as a client and let your case fail! That second fee agreement often totals another $2,400 or more, so if you use one of those firms your total cost will end up being well over $3,000! That type of bait-and-switch will never happen at Atkinson Law. We charge one flat rate for our clients, which is paid before you file and includes all of the regular standard services that you would expect from a Las Vegas bankruptcy attorney, including all standard pre-filing and post-filing activities such as going to your trustee’s meeting, interacting with the trustee on your behalf, and so forth. If you looking for a trustworthy and upfront chapter 7 bankruptcy attorney in Las Vegas please give us a call for a consultation.