The Bankruptcy Process

Chapter 7

The following is a brief summary of the process involved in filing chapter 7 bankruptcy.

  1. Mandatory credit counseling – Part of the 2005 changes to the Bankruptcy Code added a requirement that you must receive credit counseling during the 6 month period prior to filing for chapter 7. In some situations, this can be cut down to within 30 days of filing. Without this credit counseling, your case will end up being dismissed.
  2. Filing a petition – Submit a petition, along with financial information, to the bankruptcy court in your area. You will be required to give all property of the bankruptcy estate to the trustee. Once you have completed this part of the process, an automatic stay goes into place and protects you from being harassed by your creditors.
  3. Trustee takes over – approximately 1-2 weeks after filing your petition, a court-appointed trustee will take over your finances. They will review your paperwork and handle any actions to be taken on your property. Around this time, the court will also set a date for a meeting with your creditors. The new law also requires you to submit a copy of your most recent tax return to the trustee. This may be a good time to do it as it must happen prior to the next step in the process.
  4. 341 Meeting (Meeting with creditors) – Anywhere from 20-90 days from filing, you will be required to meet with the trustee and your creditors so that your creditors can get a better idea of your financial situation. This meeting is typically very short.
  5. Chapter 7 eligibility confirmed – At this point, the trustee has gathered and reviewed all of your information and the court makes a decision on whether or not you are eligible for Chapter 7 protection. If the court denies eligibility, you still may have the option to file Chapter 13 bankruptcy.
  6. Nonexempt property sold – Money raised by the trustee from the sale of nonexempt property will be passed onto your creditors and to pay any costs associated with your case.
  7. Secured property is handled – You may be required to give up any property that has an outstanding secured loan.
  8. Financial Management Course – Another 2005 addition to the Bankruptcy Code is the requirement of taking financial management classes.
  9. Final Hearing – You will be informed at this point that your discharge is granted.
  10. Case Closed – Soon after your discharge is granted, your case will be closed, you will no longer be liable to most/all of your creditors, and you can move on with your life.

David S. Osterman 603-626-5452