By Ryan C. Wood, Attorney at Law
What happens during bankruptcy depends primarily on the chapter of the bankruptcy code you file under. The most common bankruptcy is the filing of a consumer no asset chapter 7 bankruptcy. The next most common cases are consumer chapter 13 reorganizations and asset chapter 7 bankruptcy cases.
1. The Automatic Stay Takes Effect as Soon as the Case is Filed
The first thing that happens during every bankruptcy is as soon as the case is filed the automatic stay is in effect stopping any and all collection actions against you. This includes wage garnishment, foreclosure, lawsuits and harassing phone calls. Everything is stopped and must be addressed in the bankruptcy case. The whole point of filing bankruptcy is to get rid of burdensome debts and treat creditors fairly under the Bankruptcy Code.
2. Documents are Forwarded to the Trustee Assigned to the Case
After the case is filed certain documents must be forwarded to the trustee assigned to your case. Some trustees require bank account statements in addition to pay advices and your most recently filed tax return. If the case is a Chapter 7 case there is a panel of trustees that are assigned cases. Each jurisdiction has different Chapter 7 trustees to administer the bankruptcy estate. If your case us under Chapter 13 there is a standing trustee that administers all of the cases filed within in their jurisdiction.
3. Second Course is Completed and Certificate Filed
The 2005 Bankruptcy Abuse Prevention and Consumer Protection Act created two courses that must be completed. The first course, Credit Counseling, must be completed before the case can be filed. The second course, Financial Management, must be completed before you may obtain a discharge of your debts. You must complete the second course within 60 days of the date the 341 meeting of the creditors is scheduled. If you do not complete the second course your case will be closed and you will not receive a discharge.
4. 341 Meeting of the Creditors Attended and Concluded
The 341 meeting of the creditors should be the only appearance you need to make in the bankruptcy case. The meeting is usually scheduled 30-45 days after the case is filed. If the case is Chapter 7 or Chapter 13 the meeting is administered by the trustee assigned to your case. The meeting is not in a courtroom but there are formalities observed. You will provide testimony under oath and it is recorded. This meeting also provides your creditors an opportunity to ask you questions about the bankruptcy petition filed. Creditors rarely appear at the meeting unless you have committed some sort of fraud. If everything is in order then the meeting of the creditors will be concluded.
5. Debt is Discharged and Closed
In a no asset Chapter 7 case after the conclusion of the meeting of the creditors the only remaining deadline that needs to pass is creditors right to file an adversary proceeding objecting to the discharge of the debt owed to them. Creditors have 60 days from the date the meeting of the creditors is schedule to file an adversary proceeding objecting to the discharge of your debts. Once the 60 days passes the Bankruptcy Court may now enter the order discharging your debts and closing the case.
In a Chapter 13 bankruptcy case the Chapter 13 plan will still need to be confirmed or approved by the Bankruptcy Court. Depending upon the debts you are reorganizing in your Chapter 13 plan this can take a number of months. Once the Chapter 13 plan is confirmed the plan will need to be completed. Once the Chapter 13 plan is completed the order discharging the debt you do not pay back in the plan can be discharged and the bankruptcy case closed.