After sitting down with your bankruptcy attorney and discussing the pros and cons of filing either a Chapter 7 or Chapter 13, you have decided that it is in your best interest to file a Chapter 7 bankruptcy. You have given your attorneys all the information they need, and you have reviewed and signed your bankruptcy petition. What should you expect after that petition is filed?
Notifying Your Creditors & Receiving a Trustee
As soon as your case is filed, you will be given a case number and each of your creditors will be notified by mail or electronically. The bankruptcy clerks at the court will review the filing and make sure that all necessary paperwork has been filed.
You will also be assigned a Chapter 7 trustee. Shortly after filing, your attorney will send all the required paperwork to your trustee- this includes tax returns, bank statements, and paystubs.
What is an Automatic Stay?
Additionally, at the time of filing your bankruptcy, the automatic stay immediately comes into effect. The automatic stay has been discussed previously in this blog, but basically, it is what prevents creditors from trying to collect against you.
Creditors cannot begin or continue judicial proceedings against you. Creditors cannot create, perfect, or enforce a lien against your property. Additionally, creditors cannot call you, send you letters, or try to collect from you in any way.
What Does a Bankruptcy Trustee Do?
As I mentioned, everyone who files a Chapter 7 will be assigned a Chapter 7 bankruptcy trustee. The moment you file bankruptcy, all of your property becomes part of a bankruptcy estate and the bankruptcy trustee is in charge of administering the estate.
It is the bankruptcy trustee’s job to examine all of the paperwork you filed with the court and make sure it is complete and to determine if there is any non-exempt equity in the property that can be sold for the benefit of your creditors.
The trustee will conduct a meeting of creditors, also called a section 341 meeting. You will receive notice of the time and place of this meeting, and it will be held in the jurisdiction where you live. At the meeting, the trustee will swear you in and ask you a series of questions about your property and your bankruptcy paperwork.
Creditors are also allowed to come to these meetings and ask any questions they might have. Most of the time, creditors are not present. In almost all Chapter 7 cases, this is the only time a debtor will have to take a trip to the courthouse.
What Happens at the Creditors Meeting?
After the creditors meeting, the trustee will decide whether there are assets in your estate that need to be administered or sold for the benefit of creditors. If there are, the trustee will work to get the property sold. Sometimes property is sold or auctioned off to a third party, and sometimes you can pay the trustee the cash value of the property.
The vast majority of chapter 7 cases are “no asset” cases, which means there are no non-exempt assets for the trustee to sell. If there is no non-exempt equity in your property, the trustee will report to the court that there are no assets in the case.
There are also times the trustee might need time to investigate or receive more documentation from you to try to determine if there are assets available. In that case, the trustee will report to the court that there might be assets to administer and will keep your case open to investigate further.
Receiving Reaffirmation Agreements
In the meantime, you might receive reaffirmation agreements from some of your creditors. Before filing, you would have discussed with your attorney whether you want to reaffirm any of your secured debts, such as a house or car loan.
If you have decided to reaffirm a debt, the creditor will send a reaffirmation agreement to your attorney. The reaffirmation agreement must be signed by both parties into before your discharge is entered by the court.
Taking a Personal Financial Management Course
The last thing you must do before receiving your discharge is a personal financial management course. Anyone who files a bankruptcy must complete both a pre-petition credit counseling and a post-petition financial management course. The bankruptcy court will not grant a discharge unless you have completed this requirement.
Receiving Your Discharge
Generally, around 3-4 months after filing you will receive your discharge. The discharge removes your liability from paying all of your debt except in a few instances, such as child support, taxes, and student loans.
After the whole process is over, you can begin to work to rebuild your credit and start fresh! Most debtors can purchase a home about two years after filing, and can begin to rebuild credit very shortly after discharge.
Contact an Experienced Chapter 7 Bankruptcy Attorney Today
This is a general overview of what happens during a Chapter 7 case. Filing for bankruptcy is complicated, and the consequences of not abiding by the rules of the bankruptcy code, or making mistakes or omissions in your filing can be very detrimental.
If you are interested in speaking with one of our attorneys about filing bankruptcy, please set up a free consultation with one of our experienced attorneys today.