Steps in the Chapter 7 Bankruptcy Process

When those of us in the United States are facing insurmountable debt, there are many options. Some are better than others. Chapter 7 Bankruptcy is one form of financial relief provided by the federal government. It’s often a more viable and beneficial option than others. However, filing for Chapter 7 bankruptcy is not a quick fix. It involves a process that must be adhered to in order to receive relief. An experienced Monterey County bankruptcy attorney from our firm can explain more about the process and answer your questions during a private consultation.

Meet with an Attorney

Once you’ve decided that bankruptcy is the best way forward, it’s a good idea to meet with a local bankruptcy attorney who can help you determine if you’re eligible for a Chapter 7 or Chapter 13 filing. Our firm offers a free initial consultation, where you can review your potential case with a knowledgeable bankruptcy professional at no cost and with no obligation to file. When meeting with an attorney, prepare a list of questions to ask and bring documents related to your income, debts, and taxes to help the attorney understand your finances.

Credit Counseling

Current bankruptcy laws require that you receive mandatory credit counseling at some point within the six months leading up to your Chapter 7 bankruptcy filing. This can be a beneficial first step if you’re unsure whether bankruptcy is right for you, since the credit counselor can help you examine your current financial situation in greater detail and provide information about alternatives like debt consolidation.

If you do decide to proceed with a bankruptcy filing, your credit counseling must be provided by an agency that is pre-approved by the U.S. Trustee’s Office. If you do not obtain this counseling and file a certificate of completion with the bankruptcy court, your case could be dismissed.

Filing for Bankruptcy

To officially begin the process, your Monterey County bankruptcy lawyer will need to file several different forms with your local bankruptcy court. This documentation includes, among other items:

• A petition for bankruptcy
• Schedules that list your financial information
• Property exemptions
• A comprehensive list of creditors and debts
• Your most recent tax return

A court filing fee may also be required.

Trustee Review

After submitting your paperwork, a trustee will be appointed by the court to handle your case and review it. They will examine your assets to determine if any are nonexempt and review your recent financial transactions. If you have a nonexempt property to distribute to your creditors, they will arrange for that to happen.

341 Meeting

After the trustee has reviewed your case, they will schedule a meeting with your creditors, known as a 341 meeting. During this meeting, you will be placed under oath, and the trustee assigned to your case and any creditors that choose to attend can ask you questions. Your Monterey County bankruptcy attorney will also attend this meeting and can object if you are asked questions that are not permitted. This meeting is typically short, and most of the time, no creditors attend.

Take a Debtor’s Education Class

In between filing for bankruptcy and receiving your discharge, you must take a debtor’s education course. Once complete, you will need to file a form with the court to prove that you have taken the class.  

Managing Secured Debts

After this meeting, the trustee will determine if you are eligible for a Chapter 7 bankruptcy. If not, you may qualify for a Chapter 13 bankruptcy and can discuss this with your Monterey County bankruptcy lawyer. If you are eligible for Chapter 7, you will need to determine how to manage your secured debts, such as vehicles and properties. You can either:

• Give the property back to the creditor,
• Redeem it by paying the creditor for it,
• Reaffirm it—agree to keep it and to keep paying on the debt despite your bankruptcy filing, or
• Sometimes a less formal option exists called “Pay and Retain”

Discharge and Closing

Finally, between three and six months after your bankruptcy filing, you will receive a discharge of your dischargeable debts. You will no longer have any legal obligation to pay most of them. Your bankruptcy case will be closed shortly after, and you are free to move on with your fresh financial start.