Learn how Chapter 7 bankruptcy works from the beginning filing process to the final bankruptcy discharge.
In part one we walked you through the chapter 7 bankruptcy process up until you officially file your paperwork with the court. In today’s article we will finish walking you through the bankruptcy process ending with the bankruptcy discharge.
Bankruptcy Court’s Control Over Your Financial Affairs
Once you officially file for chapter 7 bankruptcy you are placing all of your property, assets, and the debt you owe in the hands of the court. You are not allowed to sell or give away any property, or pay off your pre-filing debts, once you file for chapter 7 bankruptcy - without the court’s consent. On the other hand, with only a few exceptions, you are free to do what you wish with property and income earned after you have filed.
The Bankruptcy Trustee for Chapter 7 Bankruptcy
The court exercises its control through a court-appointed person called a "bankruptcy trustee." The trustee's primary duty is to see that your creditors are paid as much as possible on what you owe them. And the more assets the trustee recovers for creditors, the more the trustee is paid.
The trustee (or the trustee's staff) will examine your papers to make sure they are complete and to look for nonexempt property to sell for the benefit of creditors. The trustee will also look at your financial transactions during the previous year to see if any can be undone to free up assets to distribute to your creditors. In most Chapter 7 bankruptcy cases, the trustee finds nothing of value to sell.
The Creditor’s Meeting
Approximately two weeks after you file, you- and all the creditors you listed in your bankruptcy papers- will receive notice that a “creditor’s meeting” has been scheduled. The bankruptcy trustee runs the meeting and will ask you questions about your general bankruptcy case and the papers you filed. For the vast majority of bankruptcy cases this will be the only trip to the courthouse you will be required to attend.
In Regards To Your Property
After the creditor’s meeting if the trustee determines that you have non-exempt property, you may be required to surrender that property or provide the trustee with the cash value equivalent. If the property isn’t worth much money or would be a burden for the trustee to sell the trustee may “abandon” the property—which means you get to keep it even though it is non-exempt.
Most property owned by Chapter 7 debtors is either exempt or is essentially worthless for purposes of raising money for the creditors. As a result, few debtors end up having to surrender any property.
The Light At The End Of The Tunnel
At the end of your bankruptcy process all of your debts are wiped out (discharged) by the court, except:
- debts that automatically survive bankruptcy, such as child support, most tax debts, and student loans, unless the court rules otherwise, and
- debts that the court has declared nondischargeable because the creditor objected (for example, debts incurred by your fraud or malicious acts).
Kathleen Michon, J.D.”A Chapter 7 Bankruptcy Overview” Nolo.com N.D. 4/19/2012. http://www.nolo.com/legal-encyclopedia/chapter-7-bankruptcy-overview-29571.html