Chapter 7 is one type of bankruptcy that is available to individuals. It is also called “straight bankruptcy” or “liquidation.” The bankruptcy court appoints a trustee who administers the bankruptcy case. The individual filing for bankruptcy usually retains all typical household goods and clothing. He may also retain his home and vehicles as long as he does not have more equity in those items than he can exempt. If the bankruptcy trustee allows an individual filing for bankruptcy to keep a car secured by a car lien or a house encumbered by a mortgage, he must pay all car and mortgage payments as they fall due and pay the insurance on those items. A Chapter 7 bankruptcy procedure usually lasts about four to six months. At the end of a Chapter 7 bankruptcy, most debts are extinguished through a discharge of debts.
Here’s a summary of the steps you’ll go through in a normal Chapter 7 bankruptcy case.
1. Talk with a bankruptcy attorney
Due to the complexity of bankruptcy cases, it is important to retain a skilled bankruptcy attorney. A licensed bankruptcy attorney will understand how filing for bankruptcy would work in your particular financial circumstances. Your bankruptcy attorney should answer your questions in plain English and explain the alternatives to filing for bankruptcy.
2. Pre-Filing Counseling Class
Before filing for bankruptcy, you’ll need to complete a credit counseling session. This is a simple process that can be done on the Internet. You are issued a certificate that must be filed with the court along with your Chapter 7 bankruptcy paperwork.
3. Filing Your Case
Once bankruptcy attorney prepares your documents, you should be given the chance to review, make corrections to, and sign them before actually filing for bankruptcy. These 50 to 70 pages of documents consist mainly of a list of your monthly income and expenses, a list of your property and possessions along with values, and names and addresses of your creditors. It is essential to have an experienced bankruptcy attorney to ensure that these documents are prepared properly.
4. Creditors Stopped – Dead in Their Tracks
The moment your Chapter 7 bankruptcy case is filed, the court issues what is called the “automatic stay.” This is a mandatory order from a federal court that forbids creditor harassment, wage garnishment actions, car repossessions, lawsuits, andIRStax liens. This powerful order means that your creditors are prohibited from even calling you or writing to you.
5. The Meeting of Creditors
Several days after filing for bankruptcy, you’ll receive a notice from the court that also contains a date and time for the required meeting of creditors, also called the 341 hearing. You’ll attend this mandatory meeting about 35 days after filing for bankruptcy. You’ll need to bring your state-issued identification and social security card.
The purpose of this meeting of creditors is to give your creditors a chance to ask questions. Don’t worry! Your bankruptcy attorney will be with you. You will be thoroughly prepared for this important meeting with the trustee and creditors who may appear.
At the meeting, the bankruptcy trustee asks you to verify that all the information in the court papers is correct. The trustee may also ask you questions about particular items on your petition such as income or assets. It normally takes about five minutes.
6. Financial Management Class
After filing for bankruptcy, you’ll need to complete a financial management course in order to be eligible for a discharge. The purpose of this financial management class is to teach you how to handle your income more wisely in the future. The certificate you receive upon completion must also be filed with the court. As with the pre-filing class, you may take it online.
7. How Long Your Case Takes To Complete
In a Chapter 7 bankruptcy, nothing else normally happens until 60 days later, when the court declares the case final and discharges your debts. This “Discharge of Debtor” is the court order which officially relieves you of any obligation to pay the bills included in your filing.