Bankruptcy Process

For a typical no asset case, the chapter 7 bankruptcy process takes about 4 months once your case is filed. The Clerk of the US Bankruptcy Court in the Western District of North Carolina requires all cases to be filed electronically. Your first task after you meet with a lawyer will be to gather up all of the requested information and documents. Next, you need to complete your Credit Counseling requirement.

Your bankruptcy lawyer will then prepare a draft of your bankruptcy petition for you to review. Your bankruptcy petition is a compilation of your financial situation. It lists all of your assets and personal belongings. It summarizes your monthly income and expenses. It will list all of your debts and financial obligations. Finally, it will provide a breakdown of your financial affairs. Once you sign off on the final version of your bankruptcy petition and have paid the court filing fee, your case will be filed with the Clerk of the United States Bankruptcy Court. Once filed, your lawyer will have an electronic record of your file, which they will provide you, and it is yours to keep.

After your case is electronically filed, the court will send notice of your filing to all of your creditors (the companies you owe money to). You will get a copy of this notice as well by mail. This notice will include your case number assigned to you. It will also list your attorney, your meeting time, and other general case information.

Automatic Stay

Immediately upon filing, no creditor or collection agency can contact you regarding your debt absent permission of the court. By law, all creditors must contact your lawyer. Should any creditor contact you after your case is filed, contact your lawyer and he/she will send them an “automatic stay.” An “automatic stay” is a court order preventing any creditor from contacting you while your case is pending. If a creditor violates the automatic stay after receiving notice of your bankruptcy, the court, on motion, may award you a monetary award for damages. Contact your attorney to discuss your case if this happens to you.

Your bankruptcy notice will also provide you with a list of important dates; including the date your case was filed, the date for your meeting of creditors (also called your §341 meeting), and the last date that your creditors may object to your bankruptcy discharge.

Approximately a month after we file your bankruptcy case, you will need to attend your meeting of creditors, the §341 meeting. This is not court, but basically an administrative hearing. At each meeting, you and your attorney must be present. Although your creditors have the right to attend this meeting also, they rarely do. The US Bankruptcy Court assigns a Trustee to review your case. The Trustee is usually an attorney. The Trustee represents all of your creditors. The trustee will swear you in and ask you some questions about your bankruptcy schedules and your financial situation. You need to bring a photo ID, your social security card and your bankruptcy notice to the meeting. Your attorney may ask you to bring additional documents as well, such as paycheck stubs, real estate appraisals, or other similar information. Contact your attorney before the §341 meeting to be prepped for the meeting.

After the §341 meeting, you are in the home stretch. If you haven’t done so already, you need to complete your Financial Management/Debtor Education course and provide your certificate of completion for your attorney to file with the Bankruptcy Court. If it applies your attorney will discuss with you whether it is necessary to reaffirm any of your secured debt. This reaffirmation agreement is a document (usually prepared by your finance company) which states that you want to remain responsible for the underlying debt, (let it survive bankruptcy) in order for you to keep the asset that you are buying. For most Chapter 7 debtors, this usually applies to auto loans. Reaffirmation agreements are not required in bankruptcy but they do help re-establish your credit after filing so you should discuss your options available with your attorney.

Finally, approximately 3 months after your case was filed, you will receive your official bankruptcy discharge notice. This is a court issued document verifying that all of your dischargeable debts have been eliminated by law. The court may keep your case open a few weeks longer to process any other administrative items, but this means your case is done and you have received a bankruptcy discharge. Congratulations. Your next step is to start the rebuilding process. Take it slow. Speak with your attorney about how this process works as it will help guide you on the path to rebuilding your credit.

Benefits of Chapter 7

• Stop harassing creditor phone calls & letters
• Stop creditors from suing you
• Stop the freeze on your bank account
• Stop utility shut off and can re-establish service
• Discharge your unsecured debt
• Discharge certain tax liability
• Discharge your obligation for any cosigned debt
• Discharge over-payments of unemployment & public aid compensation
• Better payment plan and interest rate on certain car notes
• Remove judicial liens on your home

Credit counseling / Financial Management

Bankruptcy law requires consumers to complete two classes in order to get your discharge. The first class, Credit Counseling will help you learn about all of your options available to you. It is important to be sure that bankruptcy is your best option. Bankruptcy is not something to take lightly, but should only be undertaken after you have exhausted all other options available to you. If you don’t need to file, you shouldn’t. Your lawyer will review your situation and advise you whether Chapter 7 is your best option.