When you are considering seeking debt relief, you may be wondering what will happen after you file for bankruptcy. As soon as you file a bankruptcy petition, a chain reaction of events will occur. Understanding the process of filing for Chapter 7 bankruptcy can help you make informed decisions and navigate your bankruptcy petition as smoothly as possible.
The first step involves making sure that filing for Chapter 7 bankruptcy is your best option. Many individuals benefit from filing for Chapter 7 bankruptcy and prefer this type of bankruptcy because it is relatively quick and does not involve paying anything to creditors. However, there are income limits, and you will need to pass the means test.
If you are ineligible for a Chapter 7 bankruptcy, you can pursue a Chapter 13 bankruptcy. Make sure you will be able to discharge the majority of your debt and keep the important property. It is also important to understand the downsides of filing for bankruptcy to make an informed decision.
You’ll need significant financial information and documents to complete the Chapter 7 bankruptcy petition. You also need to complete the detailed schedules and your petition. Begin gathering all of your bank statements, paycheck stubs, tax returns, and more.
To complete the bankruptcy process, you must receive credit counseling from an agency approved by the US trustee program. There is a list of approved credit counseling vendors on their websites. In some cases, you will need to take and complete the course six months before filing for bankruptcy. You will need to file your completion certificate when you submit your bankruptcy petition. There are some exceptions to the bankruptcy class requirement, but generally, you will be required to complete the class.
After accurately completing the bankruptcy paperwork, you will need to submit it to the bankruptcy court. You will need to include your counseling course certificate and a bankruptcy fee. Once your filing is complete, the court will impose an automatic stay that will prevent most creditors from taking action to collect against you during your case. The automatic stay is one of the best things for petitioners in the bankruptcy process. The automatic stay will stop creditors from taking further action to collect from you, including:
After submitting your petition, you will need to work with the bankruptcy trustee assigned to your case. The bankruptcy trustee is required to administer your estate, examine your paperwork, and preside at or ask questions at your 341 meeting of creditors. The trustee will request financial documents, including bank statements, tax returns, paycheck stubs, and more, at least seven days before the 341 meeting of creditors. Depending on your local rules, you may be required to file tax returns with Bankruptcy Court.
After you file for bankruptcy, the bankruptcy court will send you a notice with the date, time, and location of the meeting of creditors. A creditor meeting is typically the only hearing you will need to attend. It is not held at a court, and there is not a judge present. Your bankruptcy attorney can attend the meeting with you.
At this meeting, you will be required to answer questions from the bankruptcy trustee. Your creditors will have an opportunity to attend the meeting. They can also ask you questions if they attend, but they usually do not attend. You also need to answer questions about your identity and information in your petition. These meetings are not as intimidating as you think and usually only last about 10 minutes.
You might receive a reaffirmation agreement from one or more creditors asking you to reaffirm your debt. The agreement will state that you will still need to pay if the debt is not discharged during the Chapter 7 bankruptcy. If you are hoping to keep your encumbered car or home, you may benefit from signing a reaffirmation agreement.
Before you can receive a discharge of your debt, you will need to complete a debtors education course. Many providers file a certificate with the court for you after you finish the course. Do not delay completing the course because it could stall and derail your bankruptcy petition. You will not be able to receive a discharge of your debt without completing this course and submitting the certificate.
About four months after you file your petition, you will be able to receive your bankruptcy discharge in the mail. If issues arise during your bankruptcy case, the process could take longer. In many cases, the bankruptcy court will close the bankruptcy case a few days after you receive the notice in the mail.
However, your case can take longer to close if your trustee needs more time to sell your assets or litigation has arisen during the bankruptcy. Most debts can be discharged with a Chapter 7 bankruptcy, including credit card debt. There are a few exemptions. For example, child support, domestic obligations, and tax debts cannot be discharged through a Chapter 7 bankruptcy.
Chapter 7 bankruptcies are liquidation bankruptcies. A discharge of debt gives you a fresh start and removes legal obligations for you to repay any discharged debt. When the bankruptcy has been finalized, and your debts have been discharged, you can begin rebuilding your credit score. During the process, your bankruptcy trustee will sell your non-exempt assets, also called liquidating, and pay off your creditors. After the debt has been discharged, your creditors will not be able to come after you forward the money you previously owed them.
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