You may be wondering about the timeline of a Bankruptcy and what to expect during the process. This Chapter 7 bankruptcy overview will help. Consumer Bankruptcy law is designed to relieve individuals of debt and allow them to obtain a fresh start. Chapter 7 is the most common form of Bankruptcy and what most clients file.
The entire process of receiving a discharge of debt in a Chapter 7 Bankruptcy takes approximately three months from beginning to end. This timeline begins when the Bankruptcy petition is filed. Creditors are given notice of the filing, and at that time, all collection calls will stop. The Bankruptcy court then assigns a hearing date and a case Trustee. That hearing, known as a 341 meeting, is usually set for one month after the filing date. At the hearing, the Trustee will be three to review petition and ask questions. This is a very brief meeting.
After the hearing, it will take two months for case to conclude and you are issued a discharge of debts. There is typically nothing for you to do during this time, but if anything comes up you can call your attorney to discuss. Let’s take a look at a few items specifically:
You have a choice as to whether to file by yourself or with your spouse. Your attorney will cover the differences between single and joint filing. You can file if you are separated as well– the laws allow for and are designed to show the true financial picture for the individual or individuals filing, and determine if you are eligible for relief.
Property and Debt
As part of determining if you are eligible, first the court wants to understand what you own for property (real estate, cars, financial accounts, other personal property). Your attorney will complete a Chapter 7 bankruptcy overview with you including examining your financial picture. After a clear picture of your property is presented, the court then wants to know who you owe and what you owe them. This information includes credit card companies, mortgage debt, car loans, hospital bills and other debt.
The Whole Picture
When the entire financial picture is clear, the court will look for the attorney to show that your monthly income is not enough to cover your monthly expenses. In other words, despite your best efforts, you have no ability to repay your debt and you are entitled to relief. This is not a ‘judgmental’ process. You will not be ridiculed for the choices you’ve made in past purchases, and are not asked whether you spent or managed money in a responsible manner.
As part of this overall determination, there are exemption laws which draw a circle of protection around your assets. I mention this to be sure you understand that while it is possible to lose property during a bankruptcy it is not likely. Cars and homes, for example, are assets most individuals do not have to part with as part of a Bankruptcy filing.
Together, we will look at your previous six months of income from all sources, not including Social Security. If your family’s income falls below the median income for your state, you pass the test and you are eligible for relief. At that time we file your petition, present the case to the court, and request relief.
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