Chapter 7 Bankruptcy Process

Meet with your Bankruptcy Attorney

Although you are allowed to file Bankruptcy without an attorney (called “Pro Se”), it is not recommended.  Under the new bankruptcy law, there are many things that can go wrong if you do not know what you are doing, especially in a Chapter 7.  So find a good Bankruptcy Lawyer that you are comfortable with.  Meet with them, and make sure they explain all the pro’s and con’s of how a Bankruptcy will affect your particular situation.   They should also give you a list of what you need to do to get your case filed, including how much you have to pay them for the Bankruptcy.  If you don’t feel good after your first appointment with your attorney, go see another one.  There are lots of good Bankruptcy Attorneys out there and you should not hire one you do not like.

Complete Credit Counseling Course

Under the new Bankruptcy law, your attorney can not file your case until you have done a simple credit counseling course.  Your attorney will provide you instructions on how to do it.  It takes about an hour, and can be done on the internet (recommended) or on the phone.  It usually costs about $40.00, but you can sometimes get the fee waived if you are very low income.  The course will ask you questions about your income, expenses, and debts.  Neither your attorney nor the court will ever see your answers to this.  It is more of an exercise than anything else.  When you are done, the Credit Counseling Agency that you used will send a “Certificate of Counseling” to your attorney.  Your attorney will then use this Certificate to file your case.

Provide Needed Information to your Bankruptcy Attorney

When you meet with your bankruptcy attorney, they will give you some “homework” to do.  Your lawyer needs a lot of information from you to prepare your case.  They will likely ask you to provide your last 2 years tax returns, last six months of paystubs, collection letters, and maybe bank statements.  They will also have you fill out a questionnaire that will ask about your income, expenses, assets, and debts.  The sooner you get this information back to your attorney, the quicker they can begin preparing your case.

Review your Bankruptcy Petition

This is important.  Before your attorney files you case, you have to look at it and “sign off” on it.  Casually speaking, the “Petition” is composed of your “Voluntary Petition,” which is sort of like a cover sheet; the “Schedules,” which list your assets, debts, income, and expenses; and the “Statement of Financial Affairs,” which discloses everything else about your recent finances.   When you review it, make sure you disclosed all your assets.  If you try to hide assets from the court, you could face federal prison time.  Make sure you listed all your debts, because if you forget to list a debt, it is very difficult to enforce your discharge against that creditor.  And overall, check for accuracy.  Even a misspelled name can cause problems down the road.

File your Case

Once everything is ready, your attorney will “pull the trigger” and file your case.  This officially begins the Chapter 7 Process.  Most attorneys file Bankruptcy Cases electronically these days.  As soon as they file your case, the court gives them your case number which looks like this: 10-68137 (the first number is the year).  The date for the Meeting of Creditors is set soon thereafter.  Make sure your attorney send you your filing date, case number, and date for the Meeting of Creditors.

Attend Meeting of Creditors (341 Meeting)

In a Chapter 7, your Meeting of Creditors is about 4 – 6 weeks after your case is filed.  It is also called a “341 Meeting,” because it is required under Section 341 of the U.S. Bankruptcy Code.  You must be there, as this is an important part of the Bankruptcy Process.  Your attorney will tell you where you need to go and what you need to bring, but it is usually in a meeting room in a nearby federal building, and you usually just have to bring your Photo ID and Social Security Card.  When the trustee calls your name, you will sit down at a table, and either your lawyer or the trustee will ask you a few questions.  They will ask you why you had to file for Bankruptcy, if you were honest on your paperwork, and a few other easy questions.  It is extremely rare that any creditors will show up, but if they do, just answer their questions in a polite manner.  The meeting usually lasts about 5 minutes or less.

Complete Financial Management Course

This is also called your “Second Credit Counseling.”  It can be done as soon as your case is filed, but it must be completed within 45 days of the Meeting of Creditors.  It takes about an hour, and teaches you a little bit about personal finance.  Like the first credit counseling, this course costs about $40.00 and can be done on the phone or internet.  When you are finished, your attorney needs to file the certificate that you receive from the agency.  This certificate is called a “Certificate of Debtor Education.”

Sign any Reaffirmation Agreements

If you do not want you discharge to apply to a certain debt, such as a car payment or house payment, you will want to try to “Reaffirm” the debt by signing a “Reaffirmation Agreement” with the lender.  Please note that you can still retain a car or house as long as you are making the payments, but if you want to keep the debt alive (which keeps it on your credit report), you need to reaffirm it.  Your attorney will advise you whether or not you should reaffirm certain debts.  Also, you cannot force the lenders to reaffirm debts, so sometimes you will want to reaffirm a debt, but the lender will not let you.  In that case, you are no longer liable on the debt, but can usually still retain the property as long as you keep making payments (even thought the debt is technically gone, the lender still retains a lien on the property so you have to keep paying them).  To learn more about Reaffirmation Agreements, please read the “Reaffirmation Agreements” page on this site.

Receive Discharge Order

This is when you celebrate!  Your Discharge Order is a Federal Court Order that clears away the debts (except debts you reaffirmed or debts not affected by bankruptcy like student loans).  The Discharge Order is mailed to you, your lawyer, and to all the creditors.  KEEP A COPY OF IT.  You will need this Discharge Order to prove that you completed your bankruptcy and got out of debt.  If you go to buy a car or a house after the bankruptcy, the new lender will want to see a copy of it.

Check your Credit Report

The next part of the Chapter 7 Bankruptcy Process is to check your credit report.  After your Bankruptcy, creditors that were discharged have 60 days to remove themselves from your credit report.  To be more specific, they have to “Zero Out” the balance, close the account, and move it to the closed accounts section of the credit report.  They are allowed to say “Discharged in Bankruptcy” if they want to.  But they CAN NOT report that you still owe a balance.  If they do this, you need to find a lawyer that does “Discharge Violation” lawsuits and sue the creditor.  What will you win?  Maybe up to $1,000.00, plus having them fix the credit report.  A Discharge Violation lawyer can also sue a discharged creditor for merely pulling your report without your permission.  Sometimes you will see a collection agency on your report that is for a debt that was in your previous bankruptcy.  Do not put up with this!  Get a lawyer and go after them.