How Does Chapter 7 Bankruptcy Work?

Chapter 7 Bankruptcy is a FEDERAL LAW proceeding in which the debtors non-exempt assets, if any, are sold by the Chapter 7 trustee and the proceeds distributed to creditors according to the priorities established in the US Bankruptcy Code.

Whether you can file a Chapter 7 is determined by the “means test” instituted with the 2005 amendments to the US Bankruptcy Code.  Call for a FREE INITIAL CONSULTATION and find out if you qualify to file a Chapter 7 Bankruptcy.

In most cases, all of debtor’s assets will be “exempt” (this means you can keep the property or item), and therefore there are no assets to liquidate and there is no dividend to creditors. Chapter 7 is generally the simplest and quickest form of bankruptcy and is available to individuals, married couples and married individuals filing bankruptcy without the other spouse.  

ONLY a New Mexico licensed attorney can guide you through this legal procedure called a “Chapter 7 Bankruptcy.”  A “BANKRUPTCY PETITION PREPARER” can only help you fill out the thirty plus (30+) page Petition and Schedules, BUT IS PROHIBITED from providing you with ANY legal advice in regards to the exemptions, reaffirmation agreements, setting aside a transcripts of judgment, repossessions, garnishment or any legal questions concerning a Chapter 7 Bankruptcy.

I will guide you and help you complete all the documents required in filing a proper Chapter 7 Bankruptcy Petition, Schedules, Means Testing, Signature Pages, direct to you to approved organizations to obtain the proper Credit Counseling and Financial Budgeting Certifications required under the Bankruptcy Code, and complete and file all proper documents with the Bankruptcy Court Clerk. I will guide you through the following steps :

The Process

1.  Help You Fill Out My Office Forms.

2.  File The Chapter 7 Bankruptcy Petition On Your Behalf As Your Bankruptcy Attorney.

The FILING of the bankruptcy petition is an immediate injunction on your creditors from pursuing any further collections procedures against you.  FILING the petition is the only way to stop collection efforts.  When you sign a fee agreement and pay some or all of your fees, you may refer all your creditor calls directly to me.  However, only the FILING OF THE PETITION AND SCHEDULES stops creditors.  And, in order for me to file your bankruptcy, the full attorney fees and court fees must be paid BEFORE it can be filed with the bankruptcy court.

3. I Will Prepare You And Attend The Meeting Of Creditors With You.

4.  I Will Prepare You For What Happens After The Meeting Of Creditors

The creditors have sixty (60) days to object to the “dischargeability” of any of your scheduled debts. Creditors normally need a basis to make an objection.  Most creditors will not have a basis.  However, only a New Mexico licensed attorney can guide you through these matters.  I make it simple and as painless as possible for all of my clients.  However, the following are a few issues which I will explain if required.

REAFFIRMATION:  Debtors are expected to perform on their expressed intentions to either return, redeem or reaffirm debts secured by personal property.  If you are buying a vehicle on a loan, most credit unions and banks like for you to sign a reaffirmation agreement in order for you to keep the car during and after the bankruptcy.  Only a New Mexico licensed attorney can help you determine if reaffirmation is a good idea for you giving all the surrounding circumstances.

RECORDED LIENS:  If you have recorded judgements or liens they must be set aside. This is a complex area of bankruptcy law.  Call me if you have any questions.

GARNISHED WAGES/FUNDS:  I can usually get back wages/funds that were garnished ninety days (90) prior to the filing of the bankruptcy petition.


Creditors and the trustee have a 60 day period from the 341 meeting in which they may challenge the debtor’s right to a discharge (Bankruptcy Code § 727) or the “dischargeability” of a particular debt (Bankruptcy Code § 523 (a) (2), (4), (6),and (15)) by  filing an adversary proceeding.  Most creditors will not have the required “basis” to object.

Individual debtors get their discharge in about 90-100 days of filing the case. Legally, the discharge is provided to you sixty (60) days after you have your creditors meeting. This is because creditors are provided sixty (60) days to object to the dischargeability of any of your debts. The discharge affects dischargeable debts that existed at the commencement of the case.

Certain debts survive a Chapter 7 bankruptcy because they are excepted from the discharge by law: priority taxes, child support, student loans and lien on secured assets (such as in a vehicle) are among the kinds of debts that are not discharged in Chapter 7. Any debts that were reaffirmed (as in a vehicle) also survive the bankruptcy.

The goal of a bankruptcy proceeding is to obtain a discharge of debts. When a debt is discharged, it is no longer enforceable against the debtor personally. Now, you can go about repairing your credit.  Normally, most people can repair their credit within 1 to 2 years.  Filing a Chapter 7 Bankruptcy is not a death sentence.  The notation of you filing a bankruptcy remains on your credit report for at least ten (10) years.  But, with some assistance, you can repair your credit within 1 to 2 years.

When you have personal liability for a debt, a creditor with a judgment can use legal processes, like levy and garnishment, to reach your non-exempt assets and earnings even though those assets were not pledged as collateral and the debt was unsecured. THE BANKRUPTCY DISCHARGE ELIMINATES THE DEBTOR’S PERSONAL LIABILITY FOR A DISCHARGED DEBT. 

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