What to Expect When You File for Chapter 7 Bankruptcy

The entire chapter 7 bankruptcy process usually takes between 3-6 months. You will be required to prepare and file a petition with the bankruptcy court along with a filing fee of $306 (unless you qualify for a fee waiver.) Usually you will only be required to make one appearance called the meeting of the creditors. In rare instances more than one appearance might be necessary.

Credit Counseling

Prior to filing the bankruptcy petition you must consult a non-profit credit counseling agency. You will be required to complete a credit counseling course within 180 days prior to filing your petition. Once the course is complete you will receive a certification which certifies that you successfully completed the course. This certificate must be filed as part of your bankruptcy petition.

The Automatic Stay

When your bankruptcy petition is filed, a federal court order called an ‘order for relief,’ which operates as an automatic stay, is immediately entered. The automatic stay requires all creditors to stop all collection activities immediately.

The Trustee

A trustee is an official appointed by the bankruptcy court to manage your bankruptcy case. The trustee will review all papers filed with the court to make sure they are completed and to determine what assets can be sold for the benefit of your creditors. The trustee is primarily concerned with what assets you own, but will also look to see that your petition has been correctly filed and that no impermissible transfers of property or other violations have occured.

The Meeting of the Creditors

You will be required to appear at the meeting of the creditors, also known as the 341 hearing. The meeting usually takes place in the federal court house. It is usually held in a conference room with other bankruptcy petitioners present. The trustee will call your name and you will be required to sit with the trustee and answer questions under oath. The trustee can ask you any question which is relevant to your bankruptcy filing. It will usually last between 5-10 minutes. Your creditors are also invited to the meeting. Although it is rare that a creditor will appear at this hearing, if they do they can also ask you questions under oath.

Personal Property

All of your personal property that you own at the time your bankruptcy petition was filed is part of your bankruptcy estate. The trustee can seize this property and sell it to help pay your creditors. Under federal law, you are entitled to certain exceptions. These exceptions protect a limited amount of personal property from being sold by the trustee. You should pay very close attention to which exemptions you qualify for and make sure that all exemptions are declared on your bankruptcy petition.

Personal Financial Management Counseling

You must attend a two hour financial management course prior to receiving a discharge. The agency providing this counseling must be approved by the U.S. Trustee program.

The Discharge

About 60 days after the meeting of the creditors the court will issue a notice of discharge. This will signal the end of your bankruptcy case and will relieve you of your duty to pay back any debt which was discharged. Non-dischargable debt will survive the bankruptcy and you will be obligated to pay these debts.