Chapter 7 Bankruptcy Timeline, Part 1: Chapter 7
Together, Chapter 7 and Chapter 13 represent the vast majority of consumer bankruptcy filings, in Pennsylvania and throughout the country. (For the 2013 fiscal year, the U.S. Bankruptcy Court for the Eastern District of Pennsylvania reported totals of 7,170 Chapter 7 filings, with an additional 4,708 under Chapter 13.) But while both forms share the common goal of debt management, the path toward that goal is very different. In part one of our timeline, we’ll explore what happens in Chapter 7.
Let us preface this timeline by stating that Chapter 7 is the more rapid form of bankruptcy by a wide margin. Chapter 7 cases typically only take about four to six months to conclude, whereas Chapter 13 routinely takes three to five years. However, even though Chapter 7 may be quick, it is certainly not instantaneous. There are rigid procedures you need to comply with and complete if you wish to successfully obtain a discharge.
What to Do Before You File Bankruptcy
Before you may be permitted to file, you will need to complete a course in credit counseling in order to determine whether or not bankruptcy is really the most appropriate solution to your financial issues. The source of this credit counseling is very important and must be received through a government-approved agency only. A list of DOJ-approved agencies is available here.
Once you complete credit counseling, you may file for Chapter 7 bankruptcy.
But before you begin, it is very important that you retain an experienced bankruptcy attorney to help handle your case. That isn’t simply the opinion of a law firm: it’s the official stance of the U.S. Bankruptcy Courts. As the Courts’ website urges debtors:
“It is very important that a bankruptcy case be filed and handled correctly. The rules are very technical, and a misstep may affect a debtor’s rights. […] Bankruptcy has long-term financial and legal consequences — hiring a competent attorney is strongly recommended.”
(The “consequences” the quote refers to include losing the benefit of the automatic stay, having your case dismissed, and/or receiving criminal fraud charges.)
Bankruptcy Filing Process
Once you’re equipped with the support of an attorney, it’s time to begin the filing process. You’ll need to file various forms, complete with accurate and up-to-date information, including:
- Petition for Bankruptcy: Voluntary Petition (B1)
- Schedule A: Real Property (B6A)
- Schedule B: Personal Property (B6B)
- Schedule C: Property Claimed as Exempt (B6C)
- Schedule D: Creditors Holding Secured Claims (B6D)
- Schedule E: Creditors Holding Unsecured Priority Claims (B6E)
- Schedule F: Creditors Holding Unsecured Nonpriority Claims (B6F)
- Schedule I: Income (B6I)
- Schedule J: Expenses (B6J)
- Statement of Financial Affairs (B7)
- Statement of Means Test Calculation (B22A)
Keep in mind that this list is not exhaustive. For example, there are additional forms which deal with waived fees, codebtors, and confirmation that you completed the federal credit counseling requirement. Your attorney will help you prepare and file your papers, which are bound to a 15-day deadline.
Bankruptcy and Statement of Intention
After the appropriate documents are filed, the court will enter an automatic stay. This stay is an injunction which freezes all collection actions, meaning that your creditors are no longer permitted to contact you. For many people, this aspect of bankruptcy is almost as important than the actual management of debt.
Several weeks after filing, you (and your creditors) should receive a Notice of Commencement of Case, which includes meeting dates and deadlines.
Next in the process (within 30 days of filing), you must submit something called a Statement of Intention. True to its name, this document addresses your “intention” for the property you own: specifically, how it will be used (or not be used) toward paying off your creditors. Copies of the Statement should go to your creditors as well as the trustee handling your case. Once the Statement is filed, you have a 45-day time period in which to fulfill its terms.
Meeting of Creditors and Debtor Education
The Meeting of Creditors is sometimes referred to as a 341 Hearing or Meeting, due to its roots in Section 341 of the Bankruptcy Code, and takes place between 21 and 40 days after making your initial filing. Despite sometimes being called a hearing, this meeting is not generally set in a courtroom, and no bankruptcy judge will be in attendance. The attendees will be yourself, your trustee, your attorney, and your creditors.
In simple terms, the purpose of this meeting is for all the preceding paperwork and number-crunching to be reviewed. Your trustee will want to see your tax returns, bank statements, mortgage papers, and other important financial documents, and will ask you questions such as:
- Why did you decide to file for bankruptcy?
- What is your status, if any, as a business owner?
- What is your marital status?
- Do you have any child or spousal support (alimony) obligations?
- How do your monthly expenses break down?
The meeting is fairly informal and quick, sometimes wrapping up in as little as 15 minutes. Nonetheless, you must attend. If you do not attend, your case will be dismissed.
How to Receive a Bankruptcy Discharge
Once the 341 Hearing is over, your creditors and trustee have 60 days to make any objections (e.g. allegations of fraud or asset concealment). If no objections are raised within 60 days, you can receive your discharge.
However, before you can be granted a discharge, you must complete a course of debtor education (not to be confused with credit counseling). The aim of debtor education is to teach filers about basic financial management in order to avoid future bankruptcies. Like credit counseling, it must come through an agency approved by the Department of Justice. A list of valid agencies is available here.
Our Pennsylvania Bankruptcy Attorneys Can Help You Today
If you or someone you love is considering filing for Chapter 7 bankruptcy in Pennsylvania, the experienced legal team at Young, Marr & Associates can help. To schedule a completely free and private legal consultation with a Philadelphia bankruptcy lawyer, call our law offices at (215) 701-6519 in Pennsylvania, or contact us online today.