Chapter 7 Bankruptcy Process Overview
You have experienced a financial hardship and are now considering bankruptcy. Amidst the potential stress, you are now tasked with role to understand the bankruptcy process in addition to what to expect from an attorney and the fees that will be charged. It’s often a difficult season of life, so hopefully we can relieve some of the potential anxiety by providing this simple understanding of the Chapter 7 bankruptcy process. We are also developing a 100% free bankruptcy process platform to guide you through the process, so please feel free to sign up here if you are interested.
Chapter 7 Bankruptcy Process Steps:
Step 1: Do you Qualify for a Chapter 7 bankruptcy
You are considering a Chapter 7 bankruptcy, and you first want to understand whether you qualify. Unlike a Chapter 13, you have to qualify for a Chapter 7 bankruptcy through means testing. We developed a Chapter 7 calculator to estimate whether you qualify for you. We provided a rougher estimate below:
Step 2: Decide whether you will file a Chapter 7 bankruptcy
If you qualify for a Chapter 7, the next step is to determine whether you want to follow through with a Chapter 7 bankruptcy or pursue one of the alternatives. It can be helpful to understand an extensive list of bankruptcy pros and cons.
The main alternatives to a Chapter 7 bankruptcy are:
- Debt Settlement
- Debt Management
- Chapter 13 Bankruptcy
- Trying No Debt Relief
Step 3: Decide whether to hire an attorney
A Chapter 7 bankruptcy is often less complicated than the Chapter 13 Bankruptcy, so it is possible to do a Chapter 7 bankruptcy without an attorney. There are often things that an attorney can help with that would not be easily understood, but this is an important step to determine.
If you decide to hire an attorney, it’s important to understand the attorney fees and how to select a reputable attorney. We use this guide to help us determine who to allow into our attorney network.
If you decide not to hire an attorney, we found that NOLO provides an interesting how-to guide to file a Chapter 7 bankruptcy on your own. It would also be helpful to read the US Government post titled, “Filing Without an Attorney” before pursuing that route.
Step 4: Get a mandatory Credit Counseling Course
There are two mandatory credit counseling courses that you have to do to be able to complete your Chapter 7 bankruptcy. The first course is a pre-bankruptcy credit counseling course and the second is the pre-discharge debtor education
Step 5: File Petition and Other Forms
- List of all creditors and the amounts of the claims
- The source of your income including the amount and frequency
- All of the property you own
- A detailed list of your monthly living expenses
Step 6: Trustee is assigned to the case
A Chapter 7 Trustee is assigned to your case to review your paperwork and look into the nonexempt property that you may have. You may have to submit forms such as a recent tax return to the trustee. If you have nonexempt property, the trustee may manage the sale and liquidation of that property.
Step 7: The 341 Meeting of Creditors Takes Place
I have been to a number of 341 Meetings, and I have never actually seen a creditor show up. This meeting is generally between your attorney (if you hired one) and you and the Chapter 7 trustee where he/she will ask a series of questions. The meeting can last under 15 minutes.
Chapter 7 Eligibility Confirmation:
After the 341 meeting, the Chapter 7 trustee has often gathered enough information to know whether they will liquidate any of your assets. The trustee will often decide what to do with the non-exempt property at this point and whether it’s worth it to them to liquidate. They often do this by understanding the retail value of the asset and whether that asset will actually sell.
The secured debts will also need to be dealt with at this point in the process. The options are often to give up the asset or potentially reaffirm the debt on the asset, which is common for vehicles.
Step 8: Take second mandatory debt education course
You must take the second mandatory debt education course before filing for discharge. You will receive a certificate of completion and your attorney or you would add that into your filing showing the proof of completion. Once filed, the last step is to wait to receive your discharge.
Step 9: Receive your discharge
You have completed all of the necessary steps, and now it’s time to wait for the Chapter 7 bankruptcy discharge. You should receive your bankruptcy discharge in the mail. It can be with three to six months of the filing date.
There are often many bankruptcy misconceptions that we address, but the gist is that bankruptcy is the right solution for many people. Now it’s time to get on with your life after much of your debt has been cleared. We always love to hear from our readers, so feel free to comment below or shoot us an email if you have any suggestions.