- Personal Finance
Understanding Bankruptcy: Chapter 7 Proceedings
The decision to file for bankruptcy is a serious undertaking. Contrary to popular belief, you are not free and clear the moment your bankruptcy petition is filed. You will be responsible for fulfilling a number of important requirements, including credit counseling, debtor counseling, and appearing at a number of meetings and hearings.
It is important to understand exactly what will be required of you from the moment you file for bankruptcy until the day your case is closed. Every single bankruptcy case is different but the following events will happen no matter who you are, where you are located, or what your personal situation entails.
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Before You File for Bankruptcy
You are expected to take sever steps before you even move to file for bankruptcy. The first step is the investigation of alternative solutions to your financial problems. Unfortunately, most people find that there are no other ways to remedy their situations.
Those looking to file for bankruptcy must also attend a pre-bankruptcy credit counseling course. This step is not optional – it is not required by law thanks to the Bankruptcy Abuse Protection and Consumer Protection Act passed in 2005. Proof that you have completed this course must be filed with your bankruptcy petition.
Working with Your Lawyer
Once you decide to file for bankruptcy you must work very closely with your bankruptcy attorney to ensure that every aspect of the process is completed accurately. You will complete a pre-bankruptcy questionnaire which will then be used to prepare the final documents for you to sign and have filed with the courts.
Attending the Meeting of Creditors (Section 341)
Once your bankruptcy petition is filed you will receive a letter called the “Notice of Chapter 7 Bankruptcy Case, Meeting of Creditors. This letter will also be sent to your creditors and will include your name, bankruptcy case number, and a notice that creditors must stop contacting you or attempting to collect their debts. The letter will include the date of your Section 341 meeting, at which you will be required to answer a very short series of questions regarding your financial situation under oath.
Bankruptcy Chapter 7
After your Meeting of Creditors your lawyer will advise you that it is time to take the pre-discharge bankruptcy education course. This course, like the pre-bankruptcy credit counseling course, may only be taken from an approved provider.
Turning Over Your Assets and Receiving Discharge
You will, at some point, be required to turn over all assets that are nonexempt to your trustee. The trustee will liquidate your assets (sell them for cash) and use that money to pay off your creditors. This process may not yet be complete at the time the court grants your discharge and sends notices to your debtors. These notices will inform your creditors that you are no longer obligated to repay the debt you once owed.
Your bankruptcy case, however, may not close permanently for months or years. It depends on how long it takes for your assets to be liquidated. This should not, however, prohibit you from moving forward and building a new, strong, financial future.