Do the Chapter 7 Rules Require a Lump Sum Payment?

Understanding Chapter 7 rules is critical to anyone who is working through the bankruptcy process. There are often misconceptions about what happens in this form of bankruptcy and what it can and cannot do for the bankruptcy filer. Perhaps one of the most important things to note is that laws do change from state to state. However, the premise and process of filing bankruptcy as a Chapter 7 remains the same for the most part under the United States Constitution as a right for all American citizens.

What about Lump Sums?

One of the questions some people have is whether he or she will need to make some type of lump sum payment in the bankruptcy process. This is not what Chapter 7 bankruptcy requires. In fact, there are very few payments you will need to make when filing this type of bankruptcy. Consider some of the considerations below.

• Individuals who file Chapter 7 bankruptcy often file as a no asset case, which means he or she does not have many assets and therefore there are few assets to be liquidated during the process. In most cases like this, there are no payments required whatsoever.
• Individuals do have to pay the court costs associated with the bankruptcy upfront, at the time of submitting his or her bankruptcy documents. These fees, which are about $275 based on state law, must be paid at one time.
• Attorney fees must be paid for in advance of filing the bankruptcy. In most situations, the attorney will require this to be done over a period of time, to make it more affordable for the bankruptcy filer.
• If a property owner wishes to keep some type of secured property such as a home through the bankruptcy process, and that property is otherwise protected under the state's exemptions, he or she may need to make a lump sum payment to catch up on the loan. For example, if you are facing foreclosure and wish to remain in your home, it may be necessary to get caught up on those payments during the bankruptcy process.

Keep in mind that lump sum payments to any creditor over $600 in the 90 days leading up to bankruptcy can be a problem. The court may require these funds to be confiscated and repaid to the creditors evenly.

Hiring an Attorney

For those working through Chapter 7 rules, keep in mind the value of hiring an attorney. The attorney can answer questions and help you to avoid complex problems.