November 10, 2011

What Happens After Filing Bankruptcy?

Posted in Bankruptcy tagged at 9:19 am by demetriagraves

This is a series of articles that go over in more detail the timeline of a bankruptcy filing and what to expect on each step. In last week’s article I discussed what to expect prior to your bankruptcy case being filed. In this article I will go over what you can expect after your case is filed up through the day when the bankruptcy court grants you a discharge of your debts.

Immediately upon filing your bankruptcy case the bankruptcy court issues an order called the Automatic Stay that stops all collection efforts against you. The Automatic Stay is one of the most powerful tools in bankruptcy law. Whether you are being sued, your house foreclosed, your wages garnished, or are dealing with never ending collection calls, the Automatic Stay mandates that all collection efforts stop immediately. The bankruptcy court will mail out notice to your creditors within about 2-3 business days.

Every Chapter 7 bankruptcy case is assigned a trustee. The trustee assigned to your case works under the Department of Justice and their job is to evaluate your case, review your documents, and collect any non-exempt assets that can be distributed to your creditors.

A week or two after your case is filed you will receive a letter from your bankruptcy trustee informing you of the date for the Meeting of Creditors (more about that below), and requesting some bank statements, pay stubs, and tax returns. It is vital that you respond to your trustee’s request for documents in a timely manner. If you don’t, your bankruptcy case can be delayed.

If you have assets that you own free and clear that are not protected under California’s exemption laws, in a Chapter 7 bankruptcy your trustee can seize those assets, sell them, and distribute the proceeds to your creditors. Your clothing,  personal possessions and the home you live in are usually protected by exemption laws, so you don’t have to worry about losing all your assets.

The Meeting of the Creditors, or “341” meeting sounds a lot scarier than it is. While it is the creditor’s meeting, it is usually a meeting between you, your attorney and your bankruptcy trustee. Rarely do creditors actually appear at the meeting.

This meeting is an opportunity for your bankruptcy trustee to meet with you and ask you questions about your bankruptcy filing while under oath. You will be required to show government issued photo ID – i.e. your driver license, and proof of your social security number.

Once the meeting begins you will be asked a few questions by the trustee. Specifically, you will be asked if you reviewed and signed your bankruptcy documents prior to filing. If you owe or pay child support or spousal maintenance, and if you are a beneficiary under a will or trust. Then, if the bankruptcy trustee has any specific questions about your case he/she will ask them at that time.

The typical Meeting of Creditors lasts about 5 minutes – literally 5 minutes. I know it is easy for me to say, but the Meeting of Creditors, while important, is nothing to lose sleep over.

Once the Meeting of Creditors is over the only thing you have left to do is to complete a Financial Management Course. This course must be completed within 30 days after the Meeting of Creditors.

About 60 to 90 days after the Meeting of Creditors is held you will receive your Discharge Order from the bankruptcy court if you are in a Chapter 7 bankruptcy case. This order is the official document that says you are no longer legally obligated on your debts. It also signals the end of your bankruptcy case in most instances. Creditors who try and collect on debts that have been discharged are subject to being sanctioned.

Once you get through this second stage of the bankruptcy process you are well on your way to becoming debt free. In most cases the hard part is over and it is time to merely wait for the bankruptcy court to finalize your case.

If you have further questions about the bankruptcy process and if it’s the best option for you. I offer a free 30 minute telephone consultation where you can get your questions answered.

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