What is a Chapter 7 Arkansas bankruptcy?
Sometimes we don’t realize how much debt we have collected and don’t know we’re neck deep in financial trouble until it is too late. At that point you will have no other solution than to file for bankruptcy. The choice whether to file for bankruptcy is dependent on where you live. In Little Rock, Arkansas this is the most favorable way to free yourself from this debt totally and walk away with a fresh start in every way.
There are only a few examples of debt that you are not able to escape through Arkansas bankruptcy. Child support, student loans, and taxes are some of the debts that cannot be discharged by declaring bankruptcy.
A chapter 7 bankruptcy is designed to give you a completely fresh start and eliminate all your debt.
What is a Chapter 13 Arkansas bankruptcy?
In a Chapter 13 bankruptcy, you pay all of your disposable income to repay your debt, in whole or part, over three to five years. This is called your Chapter 13 plan. Your “disposable income” gets calculated by subtracting your monthly expenses from your monthly income.
You make monthly plan payments to your Chapter 13 trustee, who then pays the money to your creditors. When you’ve made all payments under the plan, you receive a “discharge.” When a debt is “discharged” at the end of your plan, that means you are not responsible for any amount of that debt that still exists. This is the main goal of bankruptcy: to get rid of your debts by paying your creditors a partial amount of your debt.
Because you are repaying creditors a portion of the debt, you generally do not have to give up any property in Chapter 13 bankruptcy.
(Here are common questions we get regarding Arkansas Bankruptcy)
Bankruptcy attorneys in Little Rock – What Do We Do?
We will guide you on how the law can help and protect you and your family from the creditors and debts you have acquired. We can help you protect your assets and show you how to discharge some of your debts without paying your creditors anything. When you file for bankruptcy, it is mandatory to list all your assets. We will help you safeguard these assets from your creditors. We will help you prepare all the documents, or prepare them for you, and file them with the appropriate courts.
Bankruptcy lawyers help you to do the necessary paperwork to figure out which debts you must pay back, and which ones you may want to keep (“re-affirm”) to avoid having to sell certain assets. The ones you may want to keep, like mortgage loans, would be listed. Next, they would walk you through the process of appointing a trustee and credit counselor. A meeting with the credit counselor is mandatory, but it can usually be done over the phone or online.
If you are filing a Chapter 13 bankruptcy, we will help you prepare your Chapter 13 plan. This plan steps out your monthly payments and how long your payments will be.
What is the role of Trustee in Chapter 7 bankruptcy?
When an individual files for Arkansas bankruptcy case in chapter 7, it is a big decision he or she is making. The process of filing for a bankruptcy and the procedures that take place after that can be a little complicated. To simplify and guide these individuals who have filed for bankruptcy, a neutral trustee is appointed to guide them through the process of organizing their assets according to the rules of the United States bankruptcy code.
The responsibilities of a Trustee will vary according to the individual’s needs and preferences. They have set of duties and responsibilities that come with their appointment that they have to follow. Below are some of their duties and responsibilities:
- Thoroughly reviewing and organizing the data
- Efficiently looking through your materials to determine the truth about your debt.
- Sometimes, assets must be sold in order to pay off some creditors. The Trustee has the duty of figuring out whether an asset is exempt from sale. If not, they will determine an asset’s value, sell it, and use the money to pay creditors.
- Executing power over preferential transfers. Some individuals attempt to pay off certain debts before filing for bankruptcy. If doing that kept other creditors from being paid through bankruptcy, the Trustee may be able to get back the money paid before filing, so that it can be equally paid to other creditors.
When you file for Chapter 7 bankruptcy, a bankruptcy trustee will be assigned to your case. The Chapter 7 bankruptcy trustee’s job is to oversee your bankruptcy case. The specific duties, and rights, of the Chapter 7 bankruptcy trustee are discussed below.
The Chapter 7 Trustee’s Commission
In a Chapter 7 bankruptcy, the trustee is mostly interested in what you own and what property you claim as exempt from sale in bankruptcy. This is because the court pays the trustee a commission on property that is sold to pay certain creditors. The trustee may receive 25% of the first $5,000, 10% of any amount between $5,000 and $50,000, and 5% of any additional money up to $1,000,000.
If your documents indicate that all of your property is exempt (which means you get to keep it), your case is considered a “no-asset” case and your creditors are told not to file claims because you don’t have any property that will be sold to pay them. The trustee also won’t show much interest in a no-asset case unless your papers suggest that you may be hiding or undervaluing assets. After all, if there is no property for the trustee to seize and sell to pay your unsecured creditors, then there is no commission for the trustee.
The Chapter 7 Trustee at the Creditors’ Meeting
The first time you will meet the Trustee in a Chapter 7 case is when you go to your creditors’ meeting, which you must attend if you don’t want your bankruptcy dismissed. Typically, if all your assets are exempt, you will hear nothing further from the trustee.
However, if there are assets in your bankruptcy estate that aren’t exempt (“nonexempt assets”), the trustee may reschedule your creditors’ meeting and ask you to submit some other documents in the meantime.
More rarely, the Trustee may hire an attorney to pursue nonexempt assets you appear to own, or even refer your case to the U.S. Trustee’s office for further action if it looks like you have engaged in dishonest activity. If you attempt to hide facts from the Trustee, the Court can dismiss your case and even disqualify you from filing for bankruptcy again.
The Chapter 7 Trustee’s Duty to Seize Nonexempt Assets
If there are nonexempt assets for the trustee to take and sell, you will be expected to cooperate in getting them to the trustee so he or she can sell them. You will also be given the opportunity to buy the assets back from the trustee at a negotiated price or substitute exempt assets for the nonexempt assets.
Trustee Abandonment of Nonexempt Assets
If you have nonexempt property that isn’t worth very much or would be difficult for the Trustee to sell, the Trustee can—and often will—abandon the property, which means you get to keep it. For example, no matter how much your used furniture may be worth in theory, many trustees won’t bother selling it. Arranging to sell used furniture is expensive and rarely produces much, if any, money for the creditors.
Searching for Nonexempt Assets
Many people wonder whether a trustee can search their homes to determine whether they are hiding property. While such searches do not happen often, you may be required to take the Trustee on a guided tour of your home, if they think it’s necessary. And if you don’t voluntarily cooperate, the trustee can obtain an order from the court to force you to let them into your home.
Look for Fraud and Inaccuracies in the Petition
The Trustee is also required, under the supervision of the U.S. Trustee, to look through the papers you have filed to make sure they are accurate and to ensure you are not lying or otherwise trying to take advantage of the bankruptcy system.
Provide Certain Notices to Child Support Payees and Agencies
If you owe back child support, the Trustee is also required to provide notices to the person you pay support to and the state child support agency to keep them informed of your bankruptcy and help them find you after your bankruptcy discharge. Specifically, the Trustee is required to provide:
- the person you pay (“payee”) with information about the state child support enforcement agency and his or her rights under the bankruptcy law,
- the state child support enforcement agency with information about the back support and the payee, and
- (when you are granted a discharge), the state child support agency and payee with information about the discharge, your last known address, the last known name and address of your employer, and the name of any creditor who holds a nondischargeable claim or a claim that has been reaffirmed. These are creditors you either must pay or creditors you have decided to pay, regardless of filing for bankruptcy.
Both the payee and the child support enforcement agency can ask these creditors to provide your last known address. The laws specifically allows these creditors to turn over such information without any penalty.
What is the role of Trustee in Chapter 13 bankruptcy?
If you’re filing a Chapter 13 bankruptcy, knowing the trustee will maximize your chances of success.
Your Chapter 13 bankruptcy case is going to take 3-5 years to get all your debts officially discharged. I often tell my clients that we’ll be close friends the whole time, working together to smooth out rough spots and keep things rolling. It’s my job to take your financial situation seriously.
The judge assigned to your Chapter 13 case plays a far smaller role, getting involved only if there’s a major dispute or issue that can’t be resolved.
Lurking in the shadows is the Chapter 13 bankruptcy trustee.
Who Is The Chapter 13 Trustee?
The Executive Office of the United States Trustee appoints and supervises trustees and monitors cases under Chapter 13 of Title 11 of the United States Code.
The Bankruptcy Reform Act of 1978 removed the bankruptcy judge from day-to-day administration of cases because the judge also oversaw the trustee.
In response, most of the administrative functions in the bankruptcy system were placed within the U.S. Department of Justice by the creation of the United States Trustee Program.
In Arkansas you have the following Trustees:
Duties of A Chapter 13 Trustee
The Chapter 13 trustee has responsibilities to the court and to the creditors in your case. We’ve listed some of those responsibilities below.
Review all filings to make sure they are correct
Review and verify information provided. The Trustee must review your first bankruptcy filing, including the petition, schedules, and statements (information about your assets and expenses), for accuracy. The Trustee may request financial documentation from you to prove the information you have provided in your bankruptcy papers and will require you to provide your tax returns and payment stubs to prove your income. You must attend a hearing (called the 341 meeting of creditors) where you must verify, under oath, the information you have provided and answer any remaining questions that the Trustee may have. The Trustee will also check that you have completed the credit counseling requirement.
Identify abusive filings. If you are attempting to hide assets or income from the Trustee or you have filed multiple bankruptcy cases in violation of the bankruptcy law or prior court orders, the Trustee must bring this to the attention of the court by filing a motion to dismiss your case.
Monitor for fraud and criminal activity. Any suspected criminal activity must be reported by the Trustee to the Department of Justice for referral to the United States Attorney and any other appropriate agency. The Trustee is also required to take steps to detect and prevent fraud or abuse by debtors, creditors. or any other party in the case.
Participate in the bankruptcy case to recover assets. The Trustee may be able to get back assets that you gave away or sold to others before you filed for bankruptcy in certain situations. In addition, the Trustee may object to your exemptions if they have been claimed using the wrong section of the bankruptcy code. The Trustee may also work out an agreement with you to make sure you pay enough funds into your plan so that your creditors get as much as possible. The Trustee will also review the attorneys’ fees you paid, and file a motion with the court to recover any unreasonable fees.
Review your Plan
Participate in plan confirmation. The Trustee must object to the confirmation of your plan if it does not meet the requirements of bankruptcy law or if it looks like you won’t be able to make the plan payments. To do that, the trustee will make sure:
- you are contributing all your disposable income (called a disposable income analysis),
- that creditors will receive at least as much as they would have received if you would have filed a Chapter 7 (called a liquidation test), and
- that you are able to perform under the plan (called a feasibility review).
Review your Claims
Review creditor claims. The Trustee must review creditor claims and either object to improper claims or see that you do so.
Manage your Payments
Collect plan payments and disburse to creditors. In a Chapter 13, you make your plan payments to the Trustee. The Trustee must make sure the proper amounts are received and, once the plan is confirmed, pay the funds to your creditors as set out in your plan. If you fall behind, the Trustee will bring this to the attention of the Court by filing a motion to dismiss your case. If your financial situation changes for the better, the Trustee may request that you change your plan to pay more money to creditors.
Provide status information. The Trustee must give information to creditors and interested parties in your case by responding to creditor requests or otherwise giving that information to creditors. The Trustee must also report to the Court and notify the Court when you have successfully completed your plan, making you eligible to receive your discharge.
Chapter 13 Trustee’s Commission. In a Chapter 13 bankruptcy, the trustee is interested in collecting and managing your payments. The Trustee gets a percentage of your payments handling your case. Typically it is 7% or less in Arkansas Bankruptcy cases.
What the Chapter 13 Trustee Will Not Do
The Chapter 13 bankruptcy Trustee isn’t your lawyer. He or she won’t give you legal advice, won’t tell you what to do, and cannot answer legal questions for you.
A bankruptcy is one of the most difficult and demanding times in a person’s life. It is best not to leave the bankruptcy to chance. There are many pitfalls (including many that I didn’t have the space to mention here.)
If you’re considering bankruptcy or have additional questions, please contact us.