Chapter 7 Bankruptcy: A Step-by-Step Process

Chapter 7 — Overland Park, KS — Wiesner & Frackowiak LCWhen your financial situation gets difficult, help is available. Bankruptcy is not for everyone, but few other methods exist of dealing with debt that are expedient and efficient.

There are many benefits to filing Chapter 7 bankruptcy and getting a discharge. A fresh start is one of them. Stopping phone calls is another.

Chapter 7 bankruptcy provides immediate relief from creditor collection actions and phone calls. The entire process takes a minimum of three months to complete but may take longer under some circumstances. There is a series of several steps rather than a single act. Read on for a step-by-step guide on what to anticipate for the bankruptcy process.

Speak to a Bankruptcy Attorney

At the initial consultation, the attorney will ask some general questions about your income, assets, monthly expenses, and debts. Because you must qualify for bankruptcy forgiveness of your debts, your attorney will also ask for specific information about such items as your family size, the amounts you pay for health insurance, and your house and car payments. With this information, your attorney will be able to tell you if you are eligible for Chapter 7. If eligible, the attorney will take your case and request a slew of documents like pay stubs, tax returns, and bank statements.

An important part of the bankruptcy process is exemption planning with your attorney. Likely, most of your assets you can keep because they are exempt from having to be sold to pay creditors. The list varies by state. Your attorney will tell you what these assets are and will help with pre-bankruptcy planning to maximize protection of your assets. Non-exempt assets must be turnover to your bankruptcy trustee.

You will likely leave the consultation with a list of papers to gather and return to your attorney as soon as possible.

Complete the Credit Counseling Course

Once your attorney agrees to take your case, you often must take one of two educational classes before you can file for bankruptcy.

The credit counseling course directs you to list your expenses and income. A credit counseling agency evaluates your budget, and if the agency determines that you cannot pay your debts, you can proceed with your filing. You can take this class any time during the six months before you file. The course is usually taken online, costs $20 (paid with a debit card), and takes about an hour.

File Your Bankruptcy With the Federal Court

Once your attorney files your bankruptcy paperwork, the automatic stay takes effect. The automatic stay is a legal injunction that halts most debt collection actions. The automatic stay order is part of your initial bankruptcy paperwork. The filing is done online from your attorney’s office. The bankruptcy court clerk will assign you a case number..

This order stops debt collection letters, emails, and phone calls. It also puts a temporary halt to foreclosure procedures, stops utility shutoffs, and temporarily prevents repossessions and evictions. If you miss listing one or more creditors, you can amend your bankruptcy paperwork to include the omitted creditors. Your creditors are notified by mail of your bankruptcy filing. Some have made arrangements to also be notified electronically.

Attend the Creditor’s Meeting

The meeting of creditors, or as commonly called “the 341 meeting” is usually scheduled for three to four weeks weeks after your filing. Many filers get nervous about the creditor’s meeting, but those fears are mostly unfounded. Many of these meetings last less than five minutes. Your attorney will be with you and will prepare you for the event. The process is simple and quick. The trustee calls you to stand, swear in, and asks you a few questions about your bankruptcy case. These questions involve verifying your current address, whether you’ve filed all of your tax returns, and whether you listed all your assets and creditors.

If a creditor is expected to appear (and appearances are rare), your attorney will let you know about the appearance ahead of time. Creditors could send legal representatives to attend the meeting for two common reasons:

  1. You want to reaffirm a debt: Debt reaffirmations allow filers to keep property, like a vehicle, if they agree to continue to pay the loan as agreed.
  2. The creditor questions your credit card use: If you charged items or took cash advances in the time period leading up to your filing, you should be prepared to prove that the charges were not frivolous.

In most cases, a creditor attends only as a formality and is no cause for alarm.

Complete the Debtor’s Education Course

The second of the two educational classes offers participants general personal finance information. You can expect to learn about topics like:

  • How to create a budget that works
  • How to plan for financial emergencies by saving
  • How to use credit wisely in the future
  • How to use consumer protection laws

This class must be complete before your bankruptcy is final. This course can be taken online, also costs $20, and takes about an hour. You should take this course shortly after your meeting of creditors but you can take it before then if you want.

Receive the Final Bankruptcy Discharge

After you’ve completed the second course and at least sixty days has passed after your meeting of creditors, your case is eligible to close with you receiving a discharge of your debts. Keep in mind some debts will not be discharged. For example, student loans, most taxes, and debt incurred by fraud are not dischargeable even if all your other debts are. Your case can be closed upon the judge’s entry of the order of discharge though the trustee may keep your case open to administer non-exempt assets. , The law allows discharge of all the dischargeable debts (remember some debts are not dischargeable) owed to creditors listed on the bankruptcy mailing matrix. Discharge means you legally don’t have to pay and the creditor cannot legally try to collect. Check the paperwork closely and bring any errors to your attorney’s attention right away.

You’ve dealt with debt for some time, but the relief you seek is at hand. Speak to Wiesner & Frackowiak, LC, to learn more about how to shed your debts and begin again. Contact us for more information.

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