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Filing for relief under Chapter 7

Is there anything that a person must do before a chapter 7 case can be filed?
Yes.  A person is not permitted to file a chapter 7 case unless he or she has, during the 180-day period prior to filing, received from an approved nonprofit budget and credit counseling agency as individual or group briefing that outlined the opportunities for available credit counseling and assisted the person in performing a budget analysis.  This briefing may be conducted by telephone or on the internet, if desired, and must be paid for by the person.  When the chapter 7 is filed, a certificate from the agency describing the services provided to the person must be filed with the court.  The cost of any counseling varies with each counseling agency.  Our office does not receive any funds or commissions from counseling agencies.

Where should a chapter 7 case be filed?
A chapter 7 case is filed in the office of the clerk of the bankruptcy court in the district where the debtor has resided or maintained a principal place of business for the greater portion of the last 180 days.  The bankruptcy court is a federal court and is a unit of the United States district court.  All court proceedings for our area take place at the federal courthouse in Cape Girardeau.

May a husband and wife file jointly under chapter 7?
Yes.  A husband and wife may file a joint case under chapter 7.  If a joint chapter 7 case is filed, only one set of bankruptcy forms is needed and only one filing fee is charged.  However, both husband and wife must receive the required credit counseling before the case is filed and both must complete the required financial management courses after the case is filed.

Under what circumstances should a joint chapter 7 case be filed?
A husband and wife should file a joint chapter 7 case if both of them are liable for one or more significant dischargeable debts.  If both spouses are liable for a substantial debt and only one spouse files under chapter 7, the creditor may later attempt to collect the debt from the non-filing spouse, even if he or she has no income or assets.  

When is the best time to file a chapter 7 case?
The answer depends on the status of the person’s dischargeable debts, the nature and status of the person’s nonexempt assets, and the actions taken or threatened to be taken by creditors.  The following rules should be followed:  

a. Don’t file the case until all anticipated debts have been incurred because only debts that have been incurred when the chapter 7 case is filed are dischargeable and it will be another eight years before the person is again eligible for a chapter 7 discharge.  For example, a person who has incurred substantial medical expenses should not file a chapter 7 case until the illness or injury has been either cured or covered by insurance, as it will do little good to discharge, say $100,000.00 of medical debts now and then incur another $100,000.00 in medical debs after the case has been filed.
b. If the person has substantial exempt assets such as a pending workers’ compensation claim or tax refund owed on account of Earned Income Credit or Additional Child Tax Credit, it may be better to file the case before these monies are received as the exemption only covers the “right to receive” and not after receipt.
c. Don’t file the case if the person filing expects to acquire nonexempt property through inheritance, life insurance or divorce in the next 180 days, because the property may have to be turned over to the trustee.
d. If an aggressive creditor has threatened to attach or garnish a person’s assets or income, the case should be filed immediately to take advantage of the automatic stay that accompanies the filing of a chapter 7 case.  If a creditor has threatened to attach or garnish the person’s wages or if a foreclosure action has been filed against his or her home, it may be necessary to file the case immediately in order to protect the person’s interest in the property.