While the Chapter 7 process can vary greatly based on the complexity of the case, most cases have very few issues and follow the same basic time line. Unlike chapter 13 bankruptcy, which can take between 3-5 years, in a Chapter 7 with few complications, the entire process takes approximately five to six months. A Chapter 7 Bankruptcy is a liquidation process and any assets not protected by the applicable exemptions will be liquidated in order to raise money for creditors.
The first thing a debtor facing bankruptcy will have to do is gather the information needed to file their case. Some of the common pieces of information that a debtor will need are tax returns filed in recent years, the past six months of pay stubs and information concerning their creditors. Please contact a bankruptcy attorney for a complete list of what information is needed to file a Chapter 7 Bankruptcy as every case is different.
After gathering the information, the debtor’s attorney will draft all the documents necessary to file the case. Once everything is prepared, the debtor will review and sign the documents and the attorney will file them with the court. On the day that a Chapter 7 bankruptcy is filed, an automatic stay goes into place preventing any collection efforts by creditors. This means that creditors cannot sue, garnish or even call the debtor.
The next major step in the process is the Meeting of Creditors (aka 341 Meeting). At the Meeting of Creditors, the debtor will sit down and answer a number of questions for the Trustee assigned to their case. The line of questioning will depend on the facts of each case, but the Trustee is generally ensuring that everything that was filed by the debtor and their attorney is true and correct. If any creditors show up to this meeting, they will also have an opportunity to question the debtor, however, this is rare. The Trustee will then determine whether there are any assets to liquidate. If there are assets to be liquidated, the Trustee will do so and distribute the money raised to the creditors. In most cases, however, there is no liquidation because all of the debtor’s assets are protected by various exemptions.
After the Meeting of Creditors, there is a two-month objection period. While objections are also rare, they can cause major complications in a Chapter 7 bankruptcy and should always be handled by a bankruptcy attorney. Assuming there are no objections in a case and any liquidation is completed, a debtor will receive the Order discharging their debts shortly after the objection period ends and the case will be closed.