After you file for Chapter 7 bankruptcy, pay the required fees, and follow the law, you get a "automatic stay." Most collection actions against you and your property will be stopped because of this stay (11 U.S.C. 362). This means that as long as the stay is in place, creditors can't start or keep lawsuits, wage garnishments, or even phone calls demanding payment.
But keep in mind that 11 U.S.C. 362(b) lists certain actions that don't stop when you file the petition. In some cases, the person is only there for a short time. So this should be a sign to be careful.
After the bankruptcy case has been filed, the bankruptcy clerk will send letters to all of the creditors whose names and addresses you gave. Then, between 20 and 40 days after you file your petition, the case trustee will call a meeting of creditors. This meeting is also called the 343 meeting, after the law that makes it happen (11 U.S.C. 343).
In a 343 hearing, the debtor will be asked to sign an oath, and both the trustee and the creditors will ask questions about the debtor's finances and property. You really need to be there. Within 10 days of the creditors' meeting, the trustee will tell the court if the case should be considered an abuse based on the 11 U.S.C. 704 means test (b).
=== Work with the trust officer ===
In a bankruptcy case, the role of the case trustee is very important. His main job is to sell off your non-exempt assets in a way that gives your unsecured creditors the most money possible. He does this by selling your property if it doesn't have any liens on it and isn't exempt, or if it's worth more than any security interest or lien on it and any exemption the debtor has on it.
In addition to being able to sell your non-exempt property, he can also take money or property from you. This is what is known as the trustee's "avoidance powers," and it must include the power to:
- Throw out any transfers to creditors that were made in the 90 days before the petition.
#! Delete security interests and other prepetition property transfers that weren't done right under nonbankruptcy law at the time the petition was filed.
- File non-bankruptcy claims, such as fraudulent conveyance and bulk transfer remedies allowed by state law.
Due to the wide range of powers a trustee has, it is important that you work with the trustee. Give the trustee any financial records or documents that he or she asks for and answer any questions that the bankruptcy code says the trustee must ask at the meeting of creditors.
This is to make sure you know what could happen if you file for bankruptcy and ask for a discharge, such as what will happen to your credit history, if you can file a petition under a different chapter, what will happen if you get a discharge, and what will happen if you reaffirm a debt.
=== After getting out ===
If everything goes well with your Chapter 7 bankruptcy case—that is, if no one files a complaint objecting to the discharge or a motion to extend the time to object—the bankruptcy court will issue a discharge order about 60 to 90 days after the first date set for the meeting of creditors (Fed. R. Bankr. P. 4004(c)).
A discharge order is a court order that lets you off the hook for most of your debts and stops your creditors from taking any action to get their money back from you. As we've already talked about, there are some kinds of debts that will never go away (see Step #1). Individual debtors get a discharge in more than 99% of Chapter 7 cases, if you don't count cases that are dropped or changed.
If you file under Chapter 7, your main goal is to get rid of almost all of your debts. With all of your debts forgiven and creditors no longer able to try to get money from you, it's clear that you have a chance to start over.
