BANKRUPTCY CENTER SAN DIEGO
             Serving ALL of San Diego County
               SAN DIEGO & NORTH COUNTY
  

INFORMATION REGARDING CHAPTER 7 BANKRUPTCY

The following is a list of terms and information that will assist you in the process of   filing
bankruptcy.  Also, included is a list of documentation that you will be asked to provide to your
attorney.  Not all of the items requested will necessarily pertain to you individually.  For
example, you may not have an interest in real property and therefore will not be asked to
provide documentation or information pertaining to any real property.


What Is A Chapter 7 Bankruptcy?  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 addition to the petition, the debtor must also file with the court:
(1) schedules of assets and liabilities;
(2) a schedule of current income and expenditures;
(3) a statement of financial affairs; and
(4) a schedule of executory contracts and unexpired leases. Fed. R. B. P. 1007(b).

Debtors must also provide the assigned case trustee with a copy of the tax return or transcripts
for the most recent tax year as well as tax returns filed during the case (including tax returns
for prior years that had not been filed when the case began). 11 U.S.C. § 521. Individual debtors
with primarily consumer debts have additional document filing requirements. They must file: a
certificate of credit counseling and a copy of any debt repayment plan developed through credit
counseling; evidence of payment from employers, if any, received 60 days before filing; a
statement of monthly net income and any anticipated increase in income or expenses after
filing; and a record of any interest the debtor has in federal or state qualified education or
tuition accounts. Id. A husband and wife may file a joint petition or individual petitions. 11 U.S.
C. § 302(a). Even if filing jointly, a husband and wife are subject to all the document filing
requirements of individual debtors.

Filing a petition under chapter 7 "automatically stays" (stops) most collection actions against
the debtor or the debtor's property. 11 U.S.C. § 362. But filing the petition does not stay certain
types of actions listed under 11 U.S.C. § 362(b), and the stay may be effective only for a short
time in some situations. The stay arises by operation of law and requires no judicial action. As
long as the stay is in effect, creditors generally may not initiate or continue lawsuits, wage
garnishments, or even telephone calls demanding payments. The bankruptcy clerk gives notice
of the bankruptcy case to all creditors whose names and addresses are provided by the debtor.

Between 20 and 40 days after the petition is filed, the case trustee (described below) will hold a
meeting of creditors. If the U.S. trustee or bankruptcy administrator (5) schedules the meeting
at a place that does not have regular U.S. trustee or bankruptcy administrator staffing, the
meeting may be held no more than 60 days after the order for relief. Fed. R. Bankr. P. 2003(a).
During this meeting, the trustee puts the debtor under oath, and both the trustee and creditors
may ask questions. The debtor must attend the meeting and answer questions regarding the
debtor's financial affairs and property. 11 U.S.C. § 343. If a husband and wife have filed a joint
petition, they both must attend the creditors' meeting and answer questions. Within 10 days of
the creditors' meeting, the U.S. trustee will report to the court whether the case should be
presumed to be an abuse under the means test described in 11 U.S.C. § 704(b).

Means Test Standards:        This is an objective method to determine which individuals are
“worthy” of Chapter 7 bankruptcy relief.  It applies only to individuals and only those
individuals whose debt is primarily consumer debt. The means test is calculated by comparing
the debtor’s average income for the past six months, annualized, to the median income for
households of the same size in the debtor’s state of residence.  If the debtor’s income is less
than or equal to the state median income, the debtor “passes” the means test and may file
Chapter 7.  If the debtor’s income exceeds state median income, a further analysis is
performed, looking at the debtor’s calculated ability to fund a Chapter 13 plan. The debtor’s
disposable income is calculated by applying a mix of actual and standardized expenses to the
debtor’s previous average income.  If the debtor can pay $10,000 in five years or as little as
$167/month to creditors, a presumption arises that a Chapter 7 filing is “abusive”.  The
presumption of abuse may be rebutted by the debtor by presenting facts and circumstances not
provided for in the prescribed Means Test.  One obvious “special circumstance” might be that
the debtor is now unemployed and doesn’t really have the ability to pay what the Means Test
suggests.

Recent California guidelines to qualify for a Chapter 7 Filing:

# of persons in household                     Gross pay (Yearly)       Monthly Income
1 person                                                   $  47,363                        $   3,947
2                                                                    62,690                             5,224
3                                                                    68,070                             5,673
4                                                                    77,014                             6,418
5                                                                    83,914                             6,993
6                                                                    90,814                             7,568
7                                                                    97,714                             8,143
8                                                                  104,614                             8,718

Each Additional Add                                     6,900                                575

COMMON TERMS AND THE §341(a) Meeting of the Creditors:

United States Trustee:    An officer of the Justice Department responsible for supervising the
administration of bankruptcy cases, estate, and trustees, monitoring plans and disclosure
statements, monitoring creditor’s committees, monitoring fee applications, and performing
other statutory duties.  The trustee conducts the §341(a) Meeting.

§341(a) Meeting:   You will be required to make an appearance at a hearing known as a “§341
(a) Meeting.  At this meeting you will be asked questions concerning the information you
provided to the trustee in regard to your bankruptcy filing.  Creditors may also appear at this
hearing and may ask you questions regarding “the nature and location of assets” e.g. “Do you
still have the car.  If so, where is it?”

Identification:   At the §341 Meeting you will be asked, and you MUST show, proof of your
identity.  You must present an ORIGINAL government issued photo identification and
confirmation of your full social security number.  The best ID to have is a California driver’s
license and original social security card.  If you do not have them you should obtain them
immediately.  Other forms of ID such as a US passport, military ID, State ID, resident alien
card, of visa (if not a US citizen) are also sufficient.

Supporting Documentation:  Prior to the §341(a) Meeting you will be required to produce
documentation to the US Trustee.  This documentation must be submitted to your attorney
PRIOR to the bankruptcy being filed!!  This documentation includes:

1.        Proof of income:  Pay stubs for at least 60 days prior to filing; and a summary of your
income for a six (6) month period prior to the case filing.  If self-employed you must complete
a Profit and Loss Statement showing gross income and gross expenses for the six (6) months
prior to the case filing – expenses must be specific enough for the Trustee to fully analyze your
business operations.

2.         Value of Vehicles:  You can go to various websites including www.kbb.com or www.
nadaguides.com for a valuation of your vehicle(s).  If you are unable to obtain an appraisal
from these sources you will need to retain an expert to do so.  Your opinion as to its value is
not acceptable.

3.        Proof of Ownership, Equity, Payoff balance, etc. regarding Vehicles:  You will need to
produce:
 (a) Copy of current vehicle registration or a copy of the certificate of title (pink slip) – Note:
Renewal notices are NOT acceptable unless that notice shows the lien holder;
 (b) Written proof of payoff balance for liens on vehicles, i.e. written statement from lien
holder, credit report, etc.;
 (c) Copy of Security Agreement associated with the sale of the vehicle(s) if registered in a
state other than California that does not denote liens on registration;
 (d) Copy of the Declarations page of insurance for each vehicle.  The insurance card is NOT
sufficient.  You must have liability and property damage insurance!!

4.        Value of Real Property:  You must provide written documentation as to the basis for
valuation of real property.  Comparable reports are acceptable only if reasonable ranges of
values are presented with identifiable comparable properties.

5.        REAL Property:  If you own real property you must provide:
 a.        Copy of first 1-2 pages only of Deed of Trust showing identity of lender and it must
include the recording stamp;
 b.        Copy of Grant Deed showing how title is held by you, and a legal description as to how
you hold ownership e.g. joint tenancy.
 c.        Written proof of payoff balance for all loans in form of most recent Statements or
other documentation from the lenders;
 d.        If property was acquired or refinanced within one (1) year of filing, a copy of the
closing statement;
 e.        If non-institutional lender, copies of documents demonstrating the actual loan
advanced by the creditor;
 f.        Copy of the Declaration page of insurance setting forth the period of coverage and
extent of coverage.  If the property is uninsured a Statement of such from the debtor.


6.    Personal Property Liens:  Financing Statements.
 a.        Copies of UCC-1/Security Agreements documenting filing with the Secretary of State;
 b.        Copies of documents demonstrating the actual loan advance for non-institutional
creditors; and
 c.        Written proof of payoff balance.

7.        Trust Documents:  Copies of any Trust instrument including exhibits and amendments
in which you have an interest of any type, i.e. beneficiary, trustee, or trustor, upon request of
Trustee.

8.        Depository Statements:  Copies of depository statement covering the date of the filing
of the bankruptcy case are to be brought to the Section 341(a) Meeting for delivery to the
Trustee.

9.        Tax Returns:  You must provide your attorney with (a) a complete copy of most recent
tax year federal IRS returns including all Statements and Schedules, or return transcript
(please note: worksheets provided to accountants do not need to be provided).

10.        Expenses in Excess of IRS or Means Test Standards:  Provide your attorney with copies
of receipts and other documentation, including the calculations demonstrating how you arrived
at your estimate of expenses, to support increased expenses since the date of filing.

11.        Claim  of Exemption (ONLY for Married couples where one spouse is not filing):  You
must have your none filing spouse sign a waiver form.

12.        Unincorporated Self-Employe, Professionals, and Business Cases:  If you are operating
a business or profession and there is no liability insurance covering the operation of the
business or profession it is necessary for the business or profession to be suspended until
liability insurance is placed in effect, with evidence of such to the Trustee.

At a minimum the Trustee wants to be informed in writing within 24 hours from filing of the
following:
a.        The status and fair market value of all assets of the estate including secured, lessor or
exemption claims, that are to be utilized in the business or profession operations;
b.        Evidence of current property and/or liability insurance coverage in connection with the
operation of the business if non-exempt property of the estate is to be utilized in operations;
c.        Evidence of current Workers Compensation insurance in connection with the operation
of business (if applicable);
d.        Evidence of current Errors and Omissions insurance coverage, if applicable;
e.        Evidence of reserve tax account to address employee/employer taxes; and
f.        The existence of any environmental, law enforcement or federal or state regulatory
issues that affect the business or profession.


Additional Documentation:  You will asked to provide the Trustee with the following:
1.        Pay stubs & written Proof of Income from all sources within the past 6 months.
2.        A copy of you last year’s Federal Income Tax return.
3.        A Statement of Debt (Bill) from each creditor you have (including mortgages and auto
loans – as mentioned above)
4.        A Current Credit Report for each debtor (additional fee)
5.        A current Market Analysis for each parcel of real estate (details above)
6.        A recent Bank Account Statement for each bank account.

Note:  Business operations utilizing property of the estate are not to be conducted post-petition
under any circumstances prior to abandonment, or allowance of exemption of property of the
estate utilized in the business or profession, without the written consent of the Trustee, or
Order of the US Bankruptcy Court.