What happens when you file bankruptcy? Firstly, the automatic stay provisions under the Bankruptcy Code prohibit your creditors from contacting you regarding your debt. Filing bankruptcy stops creditor harassment and those annoying and frustrating creditor calls. However, you are probably wondering what the process looks like - when will you have to go to court, how many times, what a trustee does, how long it takes, etc. We answer questions like these each day as bankruptcy attorneys.
Many people are nervous and anxious about filing a bankruptcy because they are scared of losing their property or they believe that filing bankruptcy will be complicated. The reality is that filing a bankruptcy is usually a huge relief for most debtors because they have been burdened for so long. Bankruptcy gives debtors a fresh start so that they can recover from a financial crisis and begin to rebuild their lives and their finances.
Preparing For What Happens When You File Bankruptcy
Part of our job as bankruptcy attorneys is to help our clients through the bankruptcy process. It is our desire to make your experience as stress-free as possible. Part of that is making sure our clients know what happens after they file bankruptcy, so that you do not become anxious and worry about bankruptcy hearings or fear what a trustee may or may not do in their case. Therefore, to answer the question, “What happens when you file bankruptcy?” we’ll begin by explaining the bankruptcy process for each chapter of consumer bankruptcy.
What Happens When You File a Chapter 7 Bankruptcy Case?
When you file a Chapter 7 bankruptcy, the court will assign a case number, schedule a hearing date for the First Meeting of Creditors and appoint a Chapter 7 trustee for your case. You will receive this information from the court within 7 to 10 days after your case is filed. The Notice of Bankruptcy will also have the location of your hearing and other information pertaining to your bankruptcy case. Your hearing date typically takes place 20 to 40 days after your case is filed. You must attend this hearing, provide photo ID and present your Social Security Card (or another acceptable form to verify your Social Security Number).
At the First Meeting of Creditors, the trustee will ask you questions under oath. Standard questions apply in each case, such as:
- What is your name and address?
- Have ever filed bankruptcy before?
- Are the documents you filed true and correct?
- Do you owe any domestic support obligations (i.e. child support or alimony)?
The trustee may then ask you specific questions about your assets, debts, income and expenses. The trustee will be reviewing the forms that you completed, so the questions you will be asked at the hearing are the same questions you have already answered at least once for your attorney. Your hearing is typically between five and ten minutes in length. At the end of the hearing, the trustee will state the case is to be held open, determine whether or not it is an asset case or no asset case and end the hearing. Almost all Chapter 7 cases are no asset cases; your attorney will have already discussed this in detail with you prior to the hearing.
Your creditors have 60 days from the date of your hearing to object to the discharge of your debts or a particular debt. In most Chapter 7 cases, creditors do not object to discharge. Once the 60 days pass with no objection, the clerk’s office will issue an order of discharge and close the case. Your case is now complete, your unsecured debts are discharged and you can begin to rebuild your personal finances without the stress of dealing with unpaid bills.
What Happens When You File A Chapter 13 Bankruptcy Case?
When you file a Chapter 13 bankruptcy case, the process is the same as in a Chapter 7 case through the First Meeting of Creditors. However, in a Chapter 13 case, you will propose a plan of reorganization to the court and to your creditors, stating how you intend to pay your debts over a 3-year or 5-year term. The court will schedule a Confirmation Hearing to hear any objections that creditors or the trustee may have to the confirmation of the plan. Provided there are no objections that have not already been settled by your attorney before the hearing, the judge will order that the plan is confirmed. You will continue making your monthly plan payments to the Chapter 13 trustee. Once you have completed your reorganization plan, the court will issue an order of discharge and close the case.
Both chapters of bankruptcy require that you complete mandatory credit counseling and financial management courses as part of your bankruptcy case. Each bankruptcy case is unique; this process is made easier by hiring an experienced bankruptcy attorney to walk you through your bankruptcy, step-by-step. To ask additional questions about the bankruptcy process, consult with an experienced bankruptcy attorney.