What Can I Expect If I File Bankruptcy?

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What can you expect if you file bankruptcy?  As soon as you file bankruptcy, you are protected by a part of the Bankruptcy Code called the “Automatic Stay”. [11 U.S.C. §362]. This stay functions as an Order or injunction from the Bankruptcy Court, which can enforce the stay. The stay stops most legal proceedings against the Debtor. It prohibits almost all attempts to collect debts owed by the Debtor while the bankruptcy is pending. Most Chapter 7 cases will remain pending for three to four months. Chapter 13 cases may continue for 3 to 5 years. The Automatic Stay generally does not prohibit attempts to collect debts which arise after the case is filed.

The Automatic Stay can be even more important than the discharge of debts. It will stop harassment by creditors over the phone or by letter. It can stop most lawsuits. And it can be used to stop, at least temporarily, a foreclosure and give a Debtor more time to pay a mortgage arrearage. However, this protection is not absolute. In some circumstances, a secured creditor can be allowed to repossess or foreclose on secured property. [SEE AUTOMATIC STAY] In most cases the Automatic Stay expires when the debts of the Debtor are discharged. The discharge provisions of the Bankruptcy Code will then   prohibit almost all attempts to collect debts which have been discharged. However, after the discharge, creditors will be free to pursue debts which have not been discharged and debts which have been reaffirmed. Many liens, mortgages and secured interests in property will survive the bankruptcy unless the underlying obligation is paid through the bankruptcy.

The debtor is required to attend a “341 Meeting” (sometimes called the “first meeting”) about 30 days after a Chapter 7 or 13 Bankruptcy is filed. In most cases, but not all, this is the only appearance the debtor is required to make. The trustee will ask questions about the debtor’s filing and finances. No judge is present. The debtor’s actual appearance may last only 5 to 10 minutes. However, there may be a much longer wait for the debtor’s case to be called.

Creditors and the trustee are given time to raise various objections and file proofs of their claims (if any of the debtor’s assets are to be distributed). If no objections are made the debtor can be granted a discharge. [SEE DISCHARGE] The discharge forbids an action by a creditor to collect a debt which has been discharged. In most Chapter 7 cases a discharge will be granted roughly 60 days after the date of the 341 meeting (about 90 days after the case was filed). In Chapter 13 cases a discharge can be granted when the final plan payment has been made, typically three to five years after the case was filed.

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