The bankruptcy process is detail-orientated and complicated. If you are considering it for the first time, you might not know what to expect. You may be wondering how long it takes, whether you will have to go to Court or when you will receive your discharge. This post is intended to serve as a general explanation of the process, and what you can expect if you choose to work with an attorney:
What is bankruptcy?
You probably already know that bankruptcy is a way to eliminate debt, but do you know how it works? The most commonly filed bankruptcies for consumers are a Chapter 7 and a Chapter 13. In its simplest form, a Chapter 7 bankruptcy is a liquidation of assets, and a Chapter 13 bankruptcy acts as a reorganization of debt through a repayment plan. Not all debts are dischargeable in bankruptcy, and not everyone will qualify for a Chapter 7 or a Chapter 13. You should consider meeting with an experienced bankruptcy attorney to get some more information and better your options.
How long does the process take?
One of our most frequently asked questions, but very difficult to answer. Typically, a no- asset Chapter 7 bankruptcy takes about 3-4 months from the point of filing to discharge. However, it can take some time to get to the point of filing, depending on the complexity of the case and whether the attorneys receive all of the requested documentation to prepare a petition. The length of the process can also vary based on whether a debtor (the person filing) can meet the pre-filing requirements. These requirements are mostly concerned with timing. An attorney will be able to talk through this timeline with you in more detail. In the alternative, a Chapter 13 bankruptcy case will remain open until the plan is completed, meaning all agreed upon payments have been made. Upon completion of all payments and all other requirements, a Chapter 13 Debtor will receive their discharge, which could take 3-5 years.
What paperwork do I have to provide?
The bankruptcy trustee (the person assigned to your case, working for the benefit of your creditors) will expect certain financial records from every debtor, such as tax returns, bank statements, pay stubs, etc. It is not unusual for a bankruptcy attorney to request this information, and more, in order to stay one step ahead of the trustee and to know how your information will affect your bankruptcy filing. Disclosing your financial history can feel hugely exposing, but essentially, it is required to comply with the bankruptcy code. You should be prepared to compile your own paperwork, ready to give to your attorney for review and preparation of your petition.
What happens once my bankruptcy petition is filed?
Once your bankruptcy petition is filed you will receive a case number and the bankruptcy court will assign a trustee to your case. This trustee will review your petition in great detail. You will also be given a date and time that you must attend a 341 Meeting, also known as a Meeting of Creditors. The debtor will be required to attend this Meeting at the bankruptcy court before the trustee, alongside their attorney. It is an opportunity for the trustee to verify that the debtor is who they say they are, and ask any questions they have about the debtor’s petition. It is also an opportunity for creditors to appear and ask any questions about the debt owed to them, if they choose to. A good attorney will aim to make this process as seamless as possible, and will prepare your petition for the trustee to review without difficulty.
What happens after the 341 Meeting?
This depends on which chapter of the bankruptcy code you have filed under. You may have to attend a reaffirmation hearing, or there may be further answers or documentation you have to provide to the Trustee. You may have to do neither of these things. For most people who file a Chapter 7 bankruptcy, this period of time is largely a waiting game, where the debtor waits for their discharge to be entered by the Court. For those who file a Chapter 13 bankruptcy, the next step after the 341 Meeting will be to wait for further recommendations from the Trustee and start making payments in accordance with the bankruptcy plan. A Chapter 13 discharge comes later, once the payment plan is complete. Confused? Read more about the difference between a Chapter 7 and a Chapter 13 HERE.
So what happens when I receive my discharge?
Provided that everything goes according to plan, debtors will receive a discharge in bankruptcy – that’s the goal, right? The granting of a discharge may also depend on compliance with the Trustee’s requests, including the receipt of additional information such as tax returns for the year of fling. When a debtor receives their discharge, the difficult part is over. However, your case may remain open for some time after the discharge to allow the Trustee to administer any assets and officially close the case.
The good news about bankruptcy is that it is a line in the sand. Yesterday, you owed money, today you don’t (although it is worth noting that bankruptcy doesn’t discharge all debts. Read our post about that can really be discharged in bankruptcy HERE). Regardless, for the majority of people, it is a true fresh start. If you want to find out more about bankruptcy and whether it’s right for you, call our office at (602) 264-0500 to schedule a meeting with one of our attorneys.