Chapter 7 bankruptcy is generally the best type of bankruptcy for most consumer debts. The following is an outline of how chapter 7 bankruptcy filing works.
The process starts out with the filing of a set of documents consisting of a chapter 7 bankruptcy petition as the main document, plus schedules which serve as addenda to it. There are also other documents in the set and they are called statements.
Chapter 7 bankruptcy is mostly an administrative process and it is important to understand the difference between such a process and a judicial process.
Because chapter 7 bankruptcy is an administrative process, filing it does not initiate a lawsuit, and there is no adversarial relationship.
This means that you are not in trouble just because you are filing chapter 7 bankruptcy. It also means that unlike an adversarial process where there is a plaintiff and a defendant, you do not need to be represented by a lawyer.
It all comes down to preparing the chapter 7 bankruptcy documents properly and it does not matter who prepares them for you.
This is a very important fact worth emphasizing.
Chapter 7 bankruptcy filing is 100% about the information contained in the documents, not about whether or not it is prepared by a lawyer.
If that is the case, then what role do chapter 7 bankruptcy lawyers play in the process and why do so many people hire lawyers for chapter 7 bankruptcy?
The answer lies in judicial tradition. Court are used to lawyers representing clients and lawyers are always seeking the easy money, so the process allows for debtors to be "represented by lawyers," even though there is hardly any need for it.
The main role that chapter 7 bankruptcy lawyers play in the bankruptcy process is to advise their clients of their property rights. These property rights have to do with bankruptcy exemptions, and with collateral securing certain debts.
Right away we see that when you file chapter 7 bankruptcy, your main concern is to protect your important property.
Because chapter 7 bankruptcy filing is an administrative process, the law government provides an administrator to administer the case and that person is called a trustee.
The trustee's job is to see to it that the intent of chapter 7 bankruptcy law is carried out fairly. This very fact means that even if you are not represented by your own attorney, your estate has de facto representation. In other words, you are not alone. You are not that the mercy of your creditors.
The Automatic Stay
Once you file the chapter 7 bankruptcy petition, by operation of law, an automatic stay immediately kicks in. This stay is equivalent to a federal judge issuing a blanket order to all your creditors to cease and desist from initiating or continuing any adversarial actions against you.
You get this stay the moment the court filing clerk receives your petition and issues you a docket number. It means that from that very instant, all civil lawsuits involving money or property rights come to a standstill.
Creditors and collection companies are barred from harassing you or from attempting to repossess your car, foreclose on your house, garnishing your pay check or taking any hostile actions against you.
When you file chapter 7 bankruptcy, the court clerk has the responsibility of notifying all your creditors in writing of the commencement of your case.
They do so using a creditor mailing list that you provide to them as part of your chapter 7 bankruptcy documents package.
Note that you do not need to hire a lawyer to get the creditors notified. The court clerk does that for you.
Under the new chapter 7 bankruptcy laws, you are required to take a credit counseling class before you file the petition, unless you have a real emergency.
If you have an emergency such as a foreclosure, you are required to take the counseling class right after filing the petition.
It is generally best to have your chapter 7 bankruptcy forms prepared before taking the counseling class since the certificate you get from the counseling class has an expiration date.
You do not have to have all of your information in order to file the petition. If you have an emergency, you can file an emergency chapter 7 bankruptcy petition without the schedules, and then amend the filing by filing the missing documents as an amendment.
You can also use the amendment filing process at anytime during your case, to make changes to the documents. This includes adding creditors that you inadvertently omitted.
So as you can see, you can file your chapter 7 bankruptcy today and worry about perfecting it later.
The Creditor Meeting
Approximately four weeks after filing the chapter 7 bankruptcy petition, you required to attend a meeting of creditors. It is also commonly referred to as the trustee meeting or the 341(a) hearing.
For consumer chapter 7 cases, the meeting of creditors does not actually involve any meeting. There are no creditors at the meeting and they do not get to grill you there.
The creditors meeting serves mainly for the trustee to inform you of your chapter 7 bankruptcy rights and to make sure that you know what you are filing bankruptcy voluntarily.
If you were misled into filing bankruptcy, you can use the creditor meeting as the opportunity to bow out of your bankruptcy filing.
The hearing usually last for under a minute unless you want it to last longer, which would be the case if you have lots of questions for the trustee.
Most people let their chapter 7 bankruptcy documents talk for them and they usually prefer to be done with it very quickly.
If you have a lawyer with you at the creditor meeting, he or she cannot represent you in the usual sense. You must appear there in person and you must answer the trustee's questions with your own mouth, unless you have a medical or physical or mental incapacity.
What sort of questions does the trustee ask?
The trustee will first inform you of your rights and then they will ask you if the information in your documents is truthful. Typically they will follow it by asking you if the facts in the documents have changed since you filed the forms. That is usually all there is to it.
In fact most debtors are surprised how easy the process is, once it is over. Those who hired a lawyer are often disappointed with themselves for doing so in the first place, particularly when they see so many other debtors sail through the hearing easily.
It is important to note that a chapter 7 bankruptcy lawyer is not allowed to speak for you at the trustee hearing. They just cannot.
Preparing for the creditor meeting
When you purchase our full-service chapter 7 bankruptcy product, we provide you information to help you prepare for your creditor meeting
Our instructions contain information that may not be readily obvious to the novice debtor but that could help make the process very smooth.
Why Creditors Do Not Show Up at The Meeting
The hearing is called as creditor meeting because it the concept is carried over from business chapter 11 cases, where creditors do show up. These are creditors who are often owed many millions of dollars by the bankruptcy business corporation.
In consumer chapter 7 bankruptcy cases, creditors do not show up because this hearing is mostly a formality required by law.
This does not mean that you will not find a representative for a major credit card company among the crowd of onlookers. Such representatives wait until your hearing is over and as you try to exit the building, they give your their business card and ask you to cal them if you what to reaffirm a debt or if you want them to still extend you credit in spite of your chapter 7 bankruptcy filing.
The Budgeting Class
After your creditor meeting, you are required to take a short budgeting class. This class is aimed to helping you learn how to manage your finances so that you do not run into financial problems again.
As with the initial credit counseling class, it usually costs a few dollars and can be taken online or by phone from any of the many class providers who advertize online.
We provide our customers a list of all the class providers for their convenience.
The Chapter 7 Discharge
A few months after your chapter 7 bankruptcy creditor meeting, the court clerk will issue you a notice in the mail telling you that your debts have been discharged. The notice does not list the debts that are discharged or any dollar amounts. It will simply say, "All dischargeable debts are discharged."
You can see now why the dollar amounts that you list in your chapter 7 bankruptcy schedules is not important. They just serve as estimates for statistical purposes.
So there is no need to hold off filing chapter 7 bankruptcy just so that you can get the latest bill. There is also no need for you to get your credit report either.
The Effect of The Discharge
Once you receive the discharge notice in your chapter 7 bankruptcy case, you are done. You never ever have to repay the discharged debts.
Chapter 7 Bankruptcy Exemptions
One of the duties of the chapter 7 bankruptcy trustee is to see if you have too much equity in your assets and to liquidate those assets and use the proceeds to repay creditors.
The vast majority of consumers do not have to worry about that because they do not have equity in excess of the allowed limits. These allowed limits are called Exemptions.
Exemptions set forth the limits of equity you are allowed to keep for each category of asset. These limits are very generous, so most people have no risk of losing anything to the trustee.
These limits make sense considering that it would not be fair for a multimillionaire to file chapter 7 bankruptcy and to keep millions of dollars in cash or to kept their private yacht. But for the average consumer, that is not the case.
When you choose our full-service bankruptcy preparation, you do not have to sweat over exemptions since it is integral to product. We have you covered.
Ask and Attorney
As you know by now, we are not lawyers and nothing on this site is intended to imply that we are. But that does not stop you from getting your legal questions answered by licensed chapter 7 bankruptcy lawyers. If you need legal advice, you can take advantage of our ask-an-attorney option. Be sure to read more about it from our vertical navigation link to the right.