What Happens When You File for Bankruptcy?
Before filing, an individual must complete credit counseling. Filing triggers an "automatic stay" that stops most collection actions, and a trustee is appointed to oversee the case. The debtor files schedules of assets, debts, income and expenses, attends a meeting of creditors, completes a debtor education course, and in most cases receives a discharge a few months after filing (in Chapter 7) or after finishing plan payments (in Chapter 13).
What the law says
- Credit counseling must be obtained before an individual files for bankruptcy, subject to very limited exceptions; if it is not completed before filing, the case could be dismissed. The courses must come from agencies approved by the U.S. Trustee Program. U.S. Trustee Program, Credit Counseling & Debtor Education Information
- Under the Bankruptcy Code, an individual generally may not be a debtor unless he or she received credit counseling from an approved agency within 180 days before filing. U.S. Courts, Chapter 7 - Bankruptcy Basics
- Along with the petition, a Chapter 7 debtor must file schedules of assets and liabilities, a schedule of current income and expenditures, a statement of financial affairs, and a schedule of executory contracts and unexpired leases. U.S. Courts, Chapter 7 - Bankruptcy Basics
- Filing triggers an automatic stay that stops most collection actions against the debtor or the debtor's property; creditors generally may not initiate or continue lawsuits, wage garnishments, or even telephone calls demanding payments. U.S. Courts, Chapter 7 - Bankruptcy Basics
- The U.S. trustee (or the bankruptcy court in Alabama and North Carolina) appoints an impartial case trustee. The debtor must cooperate with the trustee, provide requested financial records, and give the trustee a copy of the tax return or transcripts for the most recent tax year. U.S. Courts, Chapter 7 - Bankruptcy Basics
- In a Chapter 7 case, the meeting of creditors (often called the 341 meeting) is held between 21 and 40 days after the petition is filed. The trustee puts the debtor under oath, and both the trustee and creditors may ask questions about the debtor's financial affairs and property. U.S. Courts, Chapter 7 - Bankruptcy Basics
- In a Chapter 13 case, the meeting of creditors is held between 21 and 50 days after the petition is filed, and the debtor must begin making payments to the trustee within 30 days after filing. U.S. Courts, Chapter 13 - Bankruptcy Basics
- Usually the only formal proceeding a debtor must attend is the meeting of creditors, which is usually held at the offices of the U.S. trustee; much of the bankruptcy process is administrative and conducted away from the courthouse. U.S. Courts, Process - Bankruptcy Basics
- Debtor education is a separate course that must be taken after filing; with limited exceptions, debtors must complete it to receive a bankruptcy discharge. U.S. Trustee Program, Credit Counseling & Debtor Education Information
- In most Chapter 7 cases, the court issues the discharge generally 60 to 90 days after the date first set for the meeting of creditors., unless a party in interest files a complaint objecting to it. U.S. Courts, Chapter 7 - Bankruptcy Basics
FAQ
Do I have to go to court?
Usually the only formal proceeding a debtor must attend is the meeting of creditors, which is usually held at the offices of the U.S. trustee rather than in a courtroom.
What is the difference between credit counseling and debtor education?
Credit counseling must be completed before filing. Debtor education is a separate course taken after filing, and completing it is generally required to receive a discharge.
What is a "no asset" case?
If all of a Chapter 7 debtor's assets are exempt or subject to valid liens, the trustee normally files a "no asset" report, and there is no distribution to unsecured creditors.
Can secured creditors still take property after a discharge?
U.S. Courts says secured creditors may retain some rights to seize property securing an underlying debt even after a discharge is granted.
How long does the process take?
U.S. Courts' overview of the process says the debtor normally receives a discharge just a few months after the petition is filed.
Related
- Can You File Bankruptcy on Student Loans?
- Chapter 7 vs. Chapter 13 Bankruptcy
- Do I Need a Lawyer for Bankruptcy?
- How Long Does Bankruptcy Stay on Your Credit Report?
- How Much Does a Bankruptcy Lawyer Cost?
- How Much Does It Cost to File Bankruptcy?
- How Often Can You File Bankruptcy?
- What Is Chapter 13 Bankruptcy?
- What Is Chapter 7 Bankruptcy?
- Bankruptcy by state
General legal information, not legal advice. Laws change and local rules can differ; check the linked official source or talk to a lawyer about your situation.