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Once you've filed your paperwork, the bankruptcy trustee takes over your case. After you attend a brief court hearing the meeting of creditors and meet a few other requirements, you'll receive your discharge and your case will be closed, usually four-to-six months after you file for bankruptcy.

Get mandatory credit counseling. You must receive credit counseling during the six-month period prior to filing for Chapter 7 bankruptcy. This requirement was added when the bankruptcy laws were overhauled in You must get the counseling from an agency that has been approved by the United States Trustee's Office; you can find a list of approved counselors on their website. If you don't get credit counseling and file a certificate of completion with the court, your case will be dismissed. File your petition and other forms. To start your bankruptcy case, you must file a packet of forms in court.

This includes the bankruptcy petition, a number of schedules listing financial information, and a form on which you list your income and expenses, to show that you can pass the Chapter 7 means test a prerequisite for using Chapter 7.

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On your forms, you will also claim your property exemptions , under state and federal laws that allow you to keep certain property in bankruptcy. Once you have completed this part of the process, an automatic stay goes into place and stops most creditor collection actions against you for the duration of your case.

The trustee takes over. After you file your paperwork, the court will appoint a trustee to handle your bankruptcy case. The trustee's job is to review your paperwork and take your nonexempt property if you have any to distribute to your creditors. You have to submit a copy of your most recent tax return to the trustee. The meeting of creditors takes place.

You'll receive a notice from the court, telling you when your meeting of creditors also called a " meeting," after its place in the bankruptcy code will be held. At the meeting, you will have to answer questions about your finances and bankruptcy forms, under oath, from the trustee and any creditors who show up often, none attends the meeting.

The Bankruptcy Process: Chapter 7

This meeting is typically very short. Depending on your circumstances, you can choose to file between Chapter 7 and Chapter 13 under the bankruptcy law. Chapter 7: This liquidation option enables you to keep the exempted assets, whereas unsecured debts from credit cards, etc.

Here, the non-exempt assets are realized to repay the secured debts. This alternative is generally chosen by individuals with lower income and few assets, and more overall debt. The trustee collects the payments from you and transfers them to your creditors. Here again, you are permitted to keep your home, thereby preventing any looming foreclosure.

This bankruptcy option is normally preferred by individuals who are interested in keeping their non-exempt property intact or who want to buy time against foreclosures or property seizures. Don't lose your home: Use your home. The Bankruptcy Abuse Prevention and Consumer Protection Act was implemented in and made big changes to the country's bankruptcy laws.

With the implementation of the updated bankruptcy laws, people are, to a greater extent, compelled to file for Chapter 13 instead of Chapter 7. In order to be eligible for Chapter 7, your present monthly income would be calculated against the average income for a family of your size in your state.


Here, your present monthly income implies your average income over the last six-month period. If your income is less than or equal to your state's average income, then you will be eligible to file under Chapter 7.

Bankruptcy Basics -08 - The

However, if your income is higher, then you have to pass the Means Test to meet the criteria for Chapter 7. In this test, your remaining disposable income is determined by deducting the specific expenses set by the Internal Revenue Services IRS , and secured debt payments from your present monthly income. If yes, then you must choose Chapter 13 over Chapter 7. If no, then you can have access to Chapter 7.

However, the court has the authority to force you to file for Chapter 13 if it realizes that you will be misusing the system by filing for Chapter 7. As stated by the law, the court abides by the living standards set by the IRS. This implies that the court decides what amount is reasonable to pay for daily expenses of food, rent, etc. The new law places stringent restrictions on exemptions in a way that you may not be permitted to keep all or a large part of the equity in your home. Consult your bankruptcy attorney to get more information about this issue.

Finally, the new law directs that you should meet with a credit counselor in the six months before applying for bankruptcy. You are also required to attend a money management program solely at your expense before your debts are paid off. When the court issues a discharge, the debtor is then relieved of any liability to pay back his or her debts. That means creditors no longer have a legal claim against the debts, so they cannot pursue any collection activity, take any legal action or communicate with the debtor in any way. The court will send creditors a notice that the debts have been discharged.

A copy is also sent to the petitioner's lawyer as well as the U. Any creditor who attempts to collect a debt after receiving a notice of discharge can be fined. For a Chapter 7 bankruptcy, the discharge is usually issued anywhere between four and six months after the bankruptcy petition is filed. The discharge under a Chapter 13 bankruptcy is issued after the payment plan is complete, usually three to five years after the bankruptcy filing.

Bankruptcy: Overview | The Maryland People's Law Library

One main point to consider is that you can avail to a bankruptcy loan after all your debts have been repaid and the bankruptcy has been dismissed. The main purpose of this loan is to restore your worsened financial health back to normal.

see The cost of having a bankruptcy stamp on your credit score will affect your future prospects of getting a mortgage, loan or a credit card. The balance of what you owe is eliminated after the bankruptcy is discharged. Chapter 7 bankruptcy can't get you out of certain kinds of debts. You'll still have to pay court-ordered alimony and child support, taxes, and student loans. The consequences of a Chapter 7 bankruptcy are significant: you will likely lose property, and the negative bankruptcy information will remain on your credit report for ten years after the filing date. Should you get into debt again, you won't be able to file again for bankruptcy under this chapter for eight years.

Chapter 13 bankruptcy works slightly differently, allowing you to keep your property in exchange for partially or completely repaying your debt. The bankruptcy court and your attorney will negotiate a three- to five-year repayment plan. Depending on what's negotiated, you may agree to repay all or part of your debt during that time period. When you've completed the agreed repayment plan, your debt is discharged, even if you only repaid part of the amount you originally owed. While any type of bankruptcy negatively affects your credit, a Chapter 13 may be a more favorable option.

Because you repay some or all of your debt, you may be able to retain some assets. What's more, a Chapter 13 bankruptcy will cycle off your credit report after seven years, and you could file again under this chapter in as little as two years. Throughout bankruptcy proceedings, you'll likely come across some legal terms particular to bankruptcy proceedings that you'll need to know. Here are some of the most common and important ones:.

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  • While bankruptcy can eliminate a lot of debt, it can't wipe the slate completely clean if you have certain types of unforgivable debt. Types of debt that bankruptcy can't eliminate include:. Perhaps the most well-known consequence of bankruptcy is the loss of property. As previously noted, both types of bankruptcy proceedings can require you to give up possessions for sale in order to repay creditors.