Chapter 7 is generally the simplest and quickest form of bankruptcy and is available to individuals, married couples, corporations and partnerships.
Filing Chapter 7
The case is begun by filing the official petition, schedules and statement of financial affairs. The forms are approximately 50 pages in length. These forms require you to list all of your assets and all of your debts, along with some recent financial history. This is the most important and most time-consuming part of a bankruptcy filing.
It is important that every creditor is listed in the schedules with an accurate mailing address. You must list all of your debts, even if the debt is non-dischargeable (such as a student loan or an IRS tax debt) or if you intend to reaffirm the debt (such as you wanting to retain your vehicle and to continue to pay your car loan).
The schedules also list your property, any debts secured by that property, and the sale value of the property. “Property” here means “assets” or “possessions”, not just real estate. Your choice of exemptions is made on one of the schedules.
The automatic stay goes into effect upon filing the petition, creating a legal barrier to collection actions by creditors. This means that creditors may not contact a person who has filed a bankruptcy case.
After your case is filed, the court appoints a trustee and gives notice to all creditors listed in your schedules that you have filed bankruptcy. You will get a copy of that notice at the same time it is sent to creditors.
Meeting of creditors
The debtor must appear at the “Meeting of Creditors” (also called the § 341 meeting from the section of the Code that describes the meeting.) The trustee will ask the debtor questions under oath about assets and liabilities. Creditors can also question the debtor on those subjects, but seldom do.
On average, the Meeting of Creditors takes between 5 and 10 minutes.
After the first meeting of creditors
Generally, the only responsibilities the debtor has with respect to the bankruptcy after the 341 meeting is to cooperate with the trustee in providing any additional information requested by the trustee.
In most cases however, no additional information is requested.
Debtors are expected to perform on their expressed intentions to either return, redeem or reaffirm debts secured by personal property. For example, a debtor may have a mortgage or car loan that they wish to continue to pay. In general, as long as the debtor is current with payments at the time of filing, then the lender will agree to a “reaffirmation” of the debt.
Getting to discharge
Creditors and the trustee have a 60-day period from the 341 meeting in which they may challenge the debtor’s right to a discharge (Bankruptcy Code § 727) or the dischargeability of a particular debt.
Debtors now must complete a course of financial education from an approved provider in order to get their discharge. The class is generally two hours and is available online or in person from several providers.
Failure to get the class and file the certificate of completion of that class will result in the case being closed without entry of a discharge.
Individual debtors get their discharge (“wipe-out of debts”) within 4-6 months of filing the case. The discharge affects dischargeable debts that existed at the commencement of the case. Corporations and partnerships don’t get a bankruptcy discharge.
After the discharge
Certain debts survive a Chapter 7 bankruptcy because they are excepted from the discharge by law: most income taxes, child support, student loans, and criminal court fines are among the kinds of debts not discharged in Chapter 7.
Any debts that were “reaffirmed” (pulled back out of the bankruptcy, such as a mortgage loan or car loan) also survive the bankruptcy.