To initiate the chapter 7 bankruptcy process you must file a petition. Along with this petition you must file the following:
- Schedule of assets & liabilities
- Schedule of current income and expenditures
- Statement of financial affairs
- Schedule of executor contracts and unexpired leases
- Copy of the most recent tax year tax return or transcript
- Previous unfiled tax returns
- Tax returns filed during the bankruptcy case
- Certificate of credit counseling (copy of debt repayment plan completed during credit counseling)
- Evidence of payment from employers received 60 days before filing
- Statement of monthly net income (plus any anticipated increase in income or expenses after filing)
- Record of any interest in federal or state qualified education or tuition accounts
- Schedule of exempt property
To complete the above bankruptcy forms you will need to gather the following information:
- List of all creditors plus the amount and nature of their claims
- Source, amount and frequency of your income
- List of all your property
- Detailed list of monthly living expenses
If you are married, whether or not you are filing jointly, you must report your spouse’s income and expenses. This allows the court to comprehend your household financials.
Upon completion of filing your petition, any collection actions by creditors must be stopped. This is known as the “automatic stay.” The court will notify all the creditors you named in your petition who then need to stop attempting to collect on your debt through lawsuits, wage garnishments, telephone calls, etc.
Twenty-one to 40 days after your petition is filed with the bankruptcy court, the trustee assigned to your case will hold a creditors meeting. You, your trustee, your creditors and your bankruptcy attorney, if you have one, will be present at this meeting. Your presence at this meeting is required while judges are prohibited from attending. You will be placed under oath and the trustee and creditors will ask you questions about your debt and your financial situation. If you have a bankruptcy attorney, he or she can prepare you for this meeting by exposing you to the questions that will be asked and the best way to answer them.
During the meeting of creditors, the trustee assigned to your case will present to you the outcomes of filing a Chapter 7 bankruptcy to ensure you are fully aware of the aftermath. The topics covered include:
- Credit history effects
- Alternative filing options (converting to another chapter)
- Effect of receiving a discharge
- Effect of reaffirming a debt
Costs & Payments
There are some upfront fees associated with filing for bankruptcy. Because the court understands your financial situation is difficult at this point in time, there is some flexibility with payment. The first fee is a $245 case filing fee. Then there will be a $45 administrative fee and a $15 trustee surcharge.
If financially possible the fees must be paid upon filing. However, installments (maximum of 4) may be paid within 120 days of filing, with the court’s permission. Failure to complete payment will result in a dismissal of your case.
A discharge order – eliminating liability for repaying your debts and stopping any future creditors’ collection actions on this debt – will be issued 2-3 months after your meeting with creditors. The chapter 7 bankruptcy process is fairly quick if your petition is accepted.
Apart from cases that are dismissed or converted, 99% of chapter 7 cases are discharged. Please note, this applies to bankruptcy petitions that are complete, meet eligibility requirements and are accepted by the court. There are numerous exceptions, exemptions, non-dischargeable debts, special circumstances and so on that can affect your case. Bankruptcy attorneys or other legal counsel should be obtained before filing for bankruptcy. They can streamline the process, apply best practices, offer advice and assist you through all elements of the process.
A bankruptcy attorney can also prevent your discharge from being denied by ensuring you perform all the necessary steps for filing effectively and in line with the court processes. Reasons the court may deny your discharge include:
- You failed to keep or produce adequate books or financial records
- You failed to explain satisfactorily any loss of assets
- You committed a bankruptcy crime (i.e. concealing assets, destroying documentation, lying under oath, withholding information, etc.)
- You failed to obey a lawful order of the bankruptcy court
- You fraudulently transferred, concealed or destroyed property that would have become property of the estate
- You failed to complete an approved instructions course concerning financial management
If you think Chapter 7 is right for you, or you would like to learn more about eligibility, court proceedings or other details, sign up for a free bankruptcy consultation with our professional experienced bankruptcy attorneys.