The Process of Filing a Chapter 7 Bankruptcy Case: The Roadmap
What Happens After Filing Chapter 7?
When a chapter 7 case has been filed, there are a couple of different variations that need to be highlighted. First, there’s a standard filing where all the documents are included and then a more limited filing that we sometimes call a “bare bones” petition or an emergency filing. In an emergency filing, just a very limited set of documents are filed to get a case number, but all the attachments aren’t there.
The other set of qualifiers are what we call an asset case or a no asset case. You see, in chapter 7, and a lot of times people perceive, you file the paperwork and it’s all upside. The debts are just gone and there’s no other commitment. Unfortunately, that’s not really the full picture.
The exchange that happens in a chapter 7 case is that the federal government gets rid of your debts, but the trade off is that if you have assets that exceed certain necessities that the government has identified, you may have to give up these excess assets as your commitment for the chapter 7 relief. So for someone who doesn’t have assets that exceed the limitation set out by the government, we call that a no asset case. If someone has more than what they’re allowed to keep, then we call that an asset case.
Here we will map out what happens after you file a chapter 7 bankruptcy.
STEP ONE: THE PETITION IS FILED
The moment a petition is filed, it creates what we call an automatic stay or a legal freeze on all pending collection activity. Shortly after the bankruptcy is filed, notices will go to all of your creditors and you’ll receive a notice as well.
Your notice is going to go over some important highlights about the case:
- Your case number (if you haven’t received it already)
- Which trustee is assigned to your case. The trustee is kind of like a case manager. They’re the ones that review your paperwork and handle the day to day operations of your case.
- The date for your 341 meeting. It’s also known as the meeting of creditors. This meeting is usually about 45 days after the case has been filed. The trustee will be there to meet you, learn a little bit about who you are and verify the information that’s in your petition. Your creditors also have the option of attending, but in most consumer cases, creditors do not appear.
During the bankruptcy process, the filer’s liability on all debts is eliminated. However, if there are some debts (usually secured debts like a car loan or maybe a mortgage), then the filer will have to communicate or interface with that creditor to reach an agreement to reestablish the debt. It is important to note that with secured loans, even though chapter 7 bankruptcy will get rid of the personal liability, it does not get rid of what we call the security interest, meaning the ability of the lien holder to recover on that piece of property.
STEP 2: 341 MEETING OF CREDITORS
In the time between when you file your petition and your 341 meeting, there are a few steps that take place. So first, if you did file an emergency petition, you have a limited amount of time to file the remaining documents that go into your case. Those documents are generally called schedules and statements. The information that comes from those documents will provide transparency as to your household income, your expenses, and the things that you have.
Also leading up to the 341 meeting, you have to provide financial documents to the trustee. Generally, these are going to be things like tax returns, proof of income, and bank statements. If you have an attorney, they’re usually going to provide those documents to the trustee for you.
As previously stated, the 341 meeting is a meeting with the trustee. The trustee is going to go through some questions that they have about you and your financial circumstances so they can verify that you qualify for a chapter 7 case. These questions also are used to evaluate whether you have assets that exceed the limitations that we mentioned before. Again, creditors also have an opportunity to ask a few questions.
THE REST OF YOUR BANKRUPCY CASE: Overview of General Information About Asset Cases
Around the time that the 341 meeting takes place, there’s a few other steps that don’t necessarily have to go in a specific order, but do have to occur around that time. So first of all, if you do have an asset case, arrangements have to be made with the trustee to either turn over the assets or pay the trustee to offset the assets that you’d otherwise have to give up. You’ll also either directly, or with the aid of an attorney, want to make arrangements with any creditors for debts that you want to hold on to. Usually, those are going to be car loans or mortgages where you want to hold on to a particular asset. We call that arrangement a reaffirmation agreement.
Finally, you’ll want to take the second credit counseling class or the credit management class that’s required to be taken after the bankruptcy has been filed. After the 341 meeting takes place, it’s generally around two to three months before the discharge order is entered, which is the order that wipes out the debts. Now for no asset case, usually at the same time that the discharge order is entered, a case closing order will also be entered and that will be the conclusion of the case.
For asset cases, the case will remain open because the trustee is required to go through a procedure to liquidate the assets, to disperse the assets to the appropriate creditors, and to provide certain disclosures for those different procedures. The timeline for a case closing in an asset case can vary, but usually lasts around 6 to 12 months after the 341 meeting. If you have any other questions about your particular circumstances, and if you’re based in Florida, please feel welcome to either click on our website or to a schedule consultation directly through Calendly. We don’t charge anything for a 30-minute consultation.
Are you a Florida resident that has questions about your prospective bankruptcy? Are you questioning whether bankruptcy is even the right option for you? Our goal is to take a strategic approach to debt problem solving. What makes us different is that we aren’t just bankruptcy attorneys, but we look holistically at bankruptcy, debt consolidation, debt litigation and other alternatives. Click on the Calendly link below to schedule a complimentary 30-minute consultation and let’s see if we can develop a strategy that’s in your best.
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