Brief Guide to Chapter 7 Bankruptcy Process

Although most people understand that when they file for bankruptcy they will be impacting their credit in return for discharging many of their debts, most people do not understand the bankruptcy process and how to undergo filing the right paperwork and making sure to follow all the steps correctly. This is partially due to ignorance on the part of the individual, but it is also largely because the process for bankruptcy has been designed to be very thorough and perhaps even intentionally difficult in order to dissuade people from undertaking it. Regardless, knowing what you face will make preparing for it significantly easier to manage.

The ideal bankruptcy chapter, if such a thing exists, is a Chapter 7 straight bankruptcy to discharge your debts without needing to continue a payment plan. The Chapter 7 bankruptcy process usually takes individuals several months to half a year to complete, but is filled with difficulties. It is mandated that everyone take a credit counseling course before filing the initial paperwork, paid for entirely by the individual seeking bankruptcy. Once you have completed the course it is time to submit the bankruptcy petition and statement of financial affairs to the court, after which the court will release an injunction to prevent creditors from hounding you further until the case is finished one way or another. You will be required to complete a complicated means test to determine if you are able to pay some or all of your existing debts before you can qualify for Chapter 7 discharge.

Once you have passed the means test and the injunction has been issued you will have a court-appointed Trustee to oversee liquidating all of your non-exempt assets, the proceeds of which are then given to your various creditors to pay for the debts. Your creditors have 60 days to object to how the funds were distributed, and you will have 45 days to complete a financial asset management course. Should both of these stipulations work out appropriately your debt will be discharged and you will receive your Notice of Discharge, signaling an end to the process.