The Chapter 7 Process

This is a general description of what happens in a typical Chapter 7 bankruptcy case. The case begins with the filing of a bankruptcy Petition. This document presents basic information about you and your case and includes a list of all of your creditors.  Once the Petition is filed, the Bankruptcy Court immediately mails a notice to all of your creditors informing them that you have filed a case, that they must cease any collection efforts, and instructs them what they must do to participate in the case.

Prior to filing the petition, you must have completed a Debtor Education Course. This can be taken in person, over the phone, or online in several hours. At the same time the Petition is filed, or in certain circumstances within 14 days after filing the Petition, your Schedules must be filed. This is a set of documents that lists extensive information about your assets, liabilities, income, expenses, and information about your recent financial activity.

When your case is filed, it creates what is called a Bankruptcy Estate. This is a temporary legal entity that is made up of all of your property. During your case, all of this property is distributed according to the provisions of bankruptcy law. Most consumer bankruptcy cases are referred to as a No-Asset Case. This means that after the property you own that is subject to a lien from a creditor, and the property you own that is exempt from seizure by creditors is removed from the bankruptcy estate, there is no property left to sell and distribute proceeds to unsecured creditors.

Your case and your Bankruptcy Estate are administered by a court appointed Bankruptcy Trustee. Your Schedules are forwarded by the Court to the Bankruptcy Trustee, and are also available for your creditors and anyone else interested in your case to review.

Within 21 to 40 days after your case is filed, you will be required to personally attend the First Meeting of Creditors.  Prior to the meeting you will be required to forward certain information to your Trustee such as the last few months of bank statements and pay stubs. The First Meeting of Creditors is conducted by the Trustee in your case and may be attended by any of your creditors. The meeting usually lasts about 15 to 20 minutes. The Trustee asks you a number of standard questions about the information in your Schedules and usually a few questions special to your case. Any creditors attending may also ask some questions. Assuming that your schedules are in order, The First Meeting of Creditors will be adjourned that day, and you will not have to appear at any other meetings. If your information is incomplete, or there is some other problem, you may have to attend another meeting with the Trustee.

After your First Meeting of Creditors, unless there is property to be sold and distributed or there is some other problem, you will have very little to do except complete an Instructional Course Concerning Financial Management, and if you have secured property that you want to keep, signing the agreements to do so. On a random basis, a few cases are “audited” by the Trustee’s office. If your case is the subject of an audit, you may be asked to provide some additional materials supporting the information you listed in your Schedules. Otherwise, unless more time is necessary to distribute some property or there is some other problem, within 80 to 90 days after your First Meeting of Creditors, the Court will issue your Discharge. Your Discharge is the order from the court that relieves you from any further personal liability for your unsecured debts and gives you a fresh start.

Unless there are unusual problems with your case, almost all of the work that you have to do is up front before the case is filed. You will complete a set of worksheets where you provide all of the information necessary to prepare your Petition and Schedules. Complete and accurate information in the worksheets will insure that your case will proceed as uneventful as possible. In addition, during our initial meetings, I will go over with you certain kinds of transactions and financial behavior prior to your case that could cause serious problems with your case.

Soon after you receive your discharge, your case is closed and the process is complete.