What Happens After You File for Bankruptcy
Once you’ve done that, you’re almost there. But you don’t have a fresh start yet. This article will give you an overview of what happens after you file for bankruptcy.
You Get Your Case Number Immediately after you file for bankruptcy you will receive your bankruptcy case number.
If your case is filed in 2018, the first two digits of your case number will be 18. For example, 18-21204, or 18-20279.
Keep track of your case number as you will need it for any future documents related to your bankruptcy.
You Get a Trustee Shortly after filing, your case number will be assigned to a trustee. The trustee is an official appointed by the court to oversee your case.
Pay attention to mail you receive from the trustee. They will send you a letter asking you to mail them certain financial documents, like tax returns, pay stubs, and bank statements.
If you don’t mail the trustee the requested documents, you will not get a discharge of your debts.
You Creditor Protection Begins The great thing about getting your bankruptcy forms filed is that in most cases your protection from creditors begins immediately. Bankruptcy law prevents creditors from calling you, suing you, or taking any other action to collect your debt once the bankruptcy case is filed.
If you are contacted by a creditor, you can give them your bankruptcy case number and you will not hear from them again.
If you want to speed things along, however, you can also call the creditor as soon as you file and give them your bankruptcy case number.
Taking Course 2 As soon as possible after filing your bankruptcy forms, you will want to take your second mandatory bankruptcy course. The second course, called the Debtor Education Course, is similar to the first course you took.
The course is designed to educate you on making smart financial choices so that you won’t have to seek bankruptcy relief in the future. In the course, you will usually learn about:
- money management
- how to use credit wisely and effectively, and
- how to deal with an unexpected financial crisis.
Course 2 can be completed online or by phone and takes at least 2 hours to complete. The fee for the course ranges from $10-$50, however the fee may be waived if your household income is under 150% of the Federal Poverty Level.
Upon completing the course, you will have a course certificate. Many course providers will file the certificate with the court for you. If your course provider can’t do that, you’ll have to bring or mail the certificate to your local bankruptcy court.
Either way, call the bankruptcy court to make sure they have your certificate. Otherwise, you will not obtain your fresh start.
Attending the “341 Meeting” Upon filing, the Court will send you a notice telling you when and where your “341 Meeting” will be held. The 341 Meeting, also called the Meeting of Creditors, is where you meet with the trustee (not the judge) in your bankruptcy case.
Usually, the 341 Meeting takes place about a month after filing. The main purpose of the 341 Meeting is to ensure that you are not hiding any expensive assets that should be distributed to creditors.
If your papers were done correctly, you should have no trouble answering the trustee’s questions. Most 341 Meetings last about 5 minutes. Creditors are allowed to attend, although they almost never do.
On the day of the 341 meeting, you will want to arrive at least 30 minutes before the scheduled time. But you should know that trustees often get behind and you may have to wait. So unless your case is scheduled for very early in the morning, you should plan to take the entire day off from work.
Remember to bring 3 things to your 341 Meeting:
Your social security card. If you cannot find your social security card, you visit your local Social Security Administration office and ask them for a letter to verify your social security number so you can give it to your trustee at the 341 Meeting.
A government-issued photo identification card. Typically, people bring a drivers license or non-drivers license state ID. You probably don’t want to bring your passport because the trustee will look through the passport and ask you how were were able to pay for any trips listed on it.
A copy of your completed bankruptcy forms, as well as your recent pay stubs, tax return, and bank account statements.
Before you are questioned by the trustee, you will have to read this Bankruptcy Information Sheet.
You may also be asked to fill out a questionnaire asking who helped you fill out your bankruptcy forms. If you were helped by Upsolve, make sure to mention that you were helped for free.
The trustees usually ask the same questions of everyone, so you can easily prepare for the meeting watching a video like this one. During the meeting, the most important thing is to answer the trustees questions simply and do not lie, because you are answering under oath.
Sometimes the trustee will choose to adjourn your case for another meeting. This can happen if they want more documents from you. But in most cases, at the end of the 341 Meeting, the trustee will say the case is closed.
If so, that’s great news! That means that they are satisfied with your case and you are on track to get a fresh start. Absent some type of objection to your case, an extremely rare occurrence, you will be entitled to a discharge in 60 days.
Dealing with Your Vehicle
Do you own a car with financing attached to it? If so, on your bankruptcy forms you probably stated your intention to 1) surrender the car to the lender and erase the debt, 2) to reaffirm the car debt and keep making payments, or 3) to redeem the car and pay the outstanding debt in one lump sum. After filing, additional steps are required to complete each option.
A. Surrendering the Car If you choose to surrender the vehicle and erase the vehicle debt, the car will be taken back by the lender.
But before taking the vehicle, the lender must file a motion to get the court’s permission to take it. Otherwise, the lender must wait until the case is over before repossessing the vehicle.
Once the court grants permission, the lender can repossess the vehicle or you can voluntarily turn the vehicle over at an agreed location.
The lender will sell the car at auction but, if it sells for less than you owe, you won’t be responsible for the balance. It will get wiped out in your bankruptcy case.
Normally, your lender will send you the reaffirmation agreement within a few days. Then, you must sign and deliver your reaffirmation agreement to the lender within 45 days after your Meeting of Creditors. The lender will then file the signed reaffirmation agreement with the court.
If the judge approves your reaffirmation, you will get a notice of reaffirmation along with your discharge. And you will be able to keep the vehicle as long as you stay current on your payments.
C. "Redeem" the Car for Its Value Redeeming a car car means buying it back from the creditor.
If you chose to redeem the car, you are buying the car back from the lender. You get to pay the lender the current fair market value of the car (instead of what you owe them).
This can make sense if the debt on the car is over $6,000 more than the car’s value.
After filing, you to file a redemption motion like this with the court. In the motion, you generally offer to pay the lender the value of the car as defined by Kelley Blue Book or another valuation source. Sometimes, the lender will object to the value you have given the car. In that case, you will talk with the lender’s counsel over phone to reach a deal and pay the lender a slightly higher price.
Once your agreement with the lender is approved by the court, the redemption funding company will send you a contract in the mail to pay off the old lender and give you a new loan. In most cases, there isn’t a hearing in court.
Your first payment to the redemption funder is usually due 30 days after signing the contract with them.
Erasing Student Loan Debt
In general, student loan debt is very difficult to wipe out in a bankruptcy.
After filing, you will need to file a lawsuit in bankruptcy court against your student loan lender to erase the debt. If you do want to challenge your student loan debt, it makes sense to have a lawyer.
Adding a Creditor to Your Bankruptcy Forms
Before filing, you always want to check that you have listed all your creditors on your bankruptcy forms. But, no matter how careful you are, mistakes like forgetting to list a debt can happen.
Adding creditors involves filing extra paperwork with the court, along with a $31 filing fee. You can call your local bankruptcy court for details.
The reasoning is that, even if you had properly listed the debt, there would have been no funds available to pay the debt. It’s a “no harm, no foul” rule.
Unfortunately, a few states in the 1st Circuit - Maine, Massachusetts, New Hampshire, Puerto Rico, and Rhode Island, don’t follow the “no harm, no foul” approach. If you omitted a debt from your bankruptcy forms in one of these states, the debt is not erased, unless the creditor otherwise knew about the bankruptcy. So you would need to amend your bankruptcy forms to add the creditor to get the debt erased.
Other individuals apply to have the fee waived entirely, but have that request denied by the Court. So they are ordered to pay in installments.
If you’re paying the filing fee in installments, you must make sure to return to court to pay each installment by its due date. The only alternative is mailing the court a money order.
Forgetting to pay an installment is a frequent reason that cases are dismissed without a fresh start. So if you’re paying your filing fee in installments, put your installment deadlines on your calendar, so you don’t forget them.
Negotiating with Your Trustee
Occasionally, debtors will own property that is worth more than the value that can be protected for property of that type under applicable exemption law. Although the trustee has the right to seize the property, that rarely happens.
Instead, your trustee will usually sell the property back to the debtor. For example, a debtor’s automobile may be worth $3,000 more than the amount which can be protected. Usually, the trustee will let the debtor keep the car for a cash payment less than $3,000, to reflect the costs the trustee would incur in seizing and selling the vehicle.
The trustee will usually accept payment from the debtor in installments from money they make after filing. In addition, if property is over the exemption limit by only a little, say $2,000, and the property is not liquid (a car, not a bank account), in many cases the trustee will decline to sell it and will leave it to the debtor so no negotiation is required.
Getting your bankruptcy paperwork filed accurately with the court is usually the hardest part of the Chapter 7 process. But after filing, there’s more to be done if you want to get your fresh start.
You need to be sure to mail documents to your trustee, attend your 341 Meeting, and take your debtor education course. Most people who do those things receive a letter of discharge two months after their 341 meeting.