Before you file for a Chapter 7 bankruptcy, you may want to know how long the entire process takes. It makes sense to consult with a bankruptcy attorney to discuss the benefits and possible drawbacks of filing bankruptcy and to see if bankruptcy is the right option for your financial circumstances.
If a Chapter 7 bankruptcy meets your purposes and goals, there are some steps to take before filing.
Credit Counseling Requirement
Before you can file a Chapter 7, you are required to participate in and complete within 180 days of filing, a credit counseling class. This is a seminar that usually lasts about two hours that is conducted by a financial professional who advises you about your rights in bankruptcy, the alternatives to bankruptcy and more efficient ways to manage your finances.
The course is typically around $50 but the fee can be waived if it presents a financial hardship. Once the class is completed, a certificate of completion is provided that you must file along with your bankruptcy petition.
Meet Your State’s Means Test
Each state and county in some areas have a median income. To qualify for filing a Chapter 7, you must be at or below the applicable median income. You can meet your state’s’ means test by having your monthly expenses subtracted from your average monthly income to determine your disposable income, or that which can be used to pay your creditors. If your disposable income is above a certain amount, you can only file a Chapter 13.
If you do qualify for a Chapter 7, there are certain obligations for you to follow after filing, which may only take a few months to complete.
Once you have completed your mandatory credit counseling class and have qualified to file a Chapter 7, you need only supply your attorney with the necessary documentation of your debts and of the valuation of your major assets. Your attorney can have your petition prepared and filed very quickly once all necessary information is submitted.
The Meeting of Creditors
Every Chapter 7 filing requires that a meeting of creditors be scheduled. This is a 341(a) meeting that takes place within 60 days of filing. You and your attorney will meet in a room with other debtors before the Trustee appointed to your case. You will be sworn to tell the truth and asked to produce a government-issued identification card with photo. In most cases, you will be asked just a few questions about your property and the assets you listed in your petition.
You may face more questions if you have real property other than your home, if a business is being liquidated or if it appears that a substantial amount of your assets were transferred or disappeared in the past few months.
In rare cases, a creditor may be at the meeting and be permitted to ask you questions about an item of property that was secured with them.
Objections to Discharge or to Exemptions
Under the bankruptcy code, any creditor may object to the discharge of the debt owed them if the objection is made within 60 days of the initial date scheduled for your 341(a) meeting. Most objections concern credit card debt whereby the issuer may claim you incurred credit card debt without any intent to repay it. If you maxed out a card or took out large cash advances and never made any payments on the card, the company may have a legitimate claim. If there is no settlement regarding the objection, the court will set a trial date and you will have to undergo discovery and other court proceedings that could take months or longer.
The Trustee appointed to your case may also object if you claimed an inappropriate exemption or did not value it correctly to meet the exemption limit. These objections must be made within 30 days of the initial date of your 341(a) meeting.
Mandatory Financial Management Course
In all Chapter 7 cases, you must also complete a financial management course before you can receive a discharge of your debts. This is also about a two hour course that is taken within 45 days of the initial date for your 341(a) meeting.
In the majority of Chapter 7 cases, especially those concerning consumer debtors, there are few or no assets to be seized and sold by the Trustee. If no objections are filed and no other motions or charges pending that could delay the final discharge of your case, you will receive from the court a Notice of Discharge in about 2-6 weeks after the 60 day period for filing objections has passed.