The bankruptcy process isn’t as confusing as most people make it out to be. In fact, the filing can be quite simple when you follow a few guidelines. Bankruptcy, especially a Chapter 7 case, can be straightforward and often results in a debt discharge within 6 months of the filing. The key is getting to know the process and what is required along the way.
Chapter 7 bankruptcy is a debt elimination type of bankruptcy. In other words, your debts are erased or satisfied by creditors, generally at little cost to you. The first step of the process is filing the petition. This document outlines your financial history including information about your income, debts, assets, bank accounts and other funds. This is the most important document of the process, as it helps the court evaluate your potential for debt repayment and whether any assets are eligible for liquidation.
Once you have filed the petition an automatic stay order will be issued, prohibiting creditors from making collection efforts. You will also be required to pay the associated court fees. The typical Chapter 7 case costs about $275, depending on your state of filing. Some states also require you to complete a 90 minute credit counseling course and provide the completion certificate to the court. Usually within 30 days of your filing a 341 Meeting of Creditors will be held, which gives your creditors the chance to meet with you and your Trustee to discuss matters related to your debts. In this meeting, creditors may dispute debt information or plead their case for repayment.
While you are completing the necessary steps of the Chapter 7 process, the court is reviewing your information to make a ruling on your accounts. They may determine that some creditors are to be repaid, especially secured debts like mortgages if you want to keep the property; while other creditors may not receive any payment. Once the court approves a plan and debts have been either satisfied through repayment, asset liquidation or ordered to be written off, your case will be discharged.