What Happens After Filing for Bankruptcy?

3,373 families filed bankruptcy using Upsolve.

Written by Jenni Klock Morel, Esq.  
Updated February 5, 2020

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Knowing what happens after you file bankruptcy can make it seem less intimidating. Read on to learn about filing Chapter 7 bankruptcy, the meeting of creditors, keeping your car, and why creditors must stop contacting you after filing.

(1) The things that happen immediately after filing bankruptcy

As soon as you file your Chapter 7 bankruptcy, you are given a case number and a bankruptcy trustee is assigned to your case. The bankruptcy trustee will oversee your bankruptcy filing, will review your bankruptcy forms, and may ask for additional documents to verify your information. The trustee will also conduct the meeting of creditors

Protection from your creditors begins immediately after filing for Chapter 7 or Chapter 13 bankruptcy. This is called the automatic stay. Once you file and the automatic stay takes effect, your creditors are not allowed to take collection action against you. After you file for bankruptcy protection, your creditors can't call you, or try to collect payment from you for medical bills, credit card debts, personal loans, unsecured debts, or other types of debt. Wage garnishments must also stop immediately after filing for personal bankruptcy. 

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(2) What happens to your credit score after filing bankruptcy

Chapter 7 bankruptcy and Chapter 13 bankruptcy filings show up on your credit report. How long it shows up depends on which type of bankruptcy you file. Chapter 7 bankruptcy remains on your credit report for 10 years after the filing date. A completed Chapter 13 bankruptcy remains on your credit report for 7 years after the filing date, or 10 years if the case was not completed to discharge

As a result, filing bankruptcy will initially lower your credit score. How much your credit score will drop depends on how high or low it was before bankruptcy. Generally, a decrease between 100 to 200 points can be expected. 

The good news is that you can begin rebuilding your credit as soon as your bankruptcy discharge is entered. It's possible to have a better score within 1–2 years of filing. The credit scores of most bankruptcy filers are already lower because of missed payments. After the court grants a discharge, most unsecured debts are erased. Credit scores improve because there are no more missed payments and discharged accounts show a zero balance.

After Chapter 7 and Chapter 13 bankruptcy is filed, you will get credit card offers in the mail. These offers can be for secured credit cards, sometimes called prepaid cards, which require a cash deposit. Or, offers can be for unsecured credit cards, but will likely have high interest rates or annual fees. Part of rebuilding credit after bankruptcy is getting credit and using it wisely. It’s not a bad idea to get a secured or unsecured credit card after bankruptcy. A good repayment history will help your credit score, so make sure you pay the debt off in full every month. Consider using the card only for gas or groceries so that you know you can pay the full bill. 

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(3) The final steps of your journey towards lasting debt relief

Getting all of your bankruptcy forms prepared and filed with the bankruptcy court is usually the most time-intensive process of a Chapter 7 bankruptcy. But that doesn’t mean that your job is done. There are a few things everyone filing Chapter 7 bankruptcy has to do in order to successfully complete their bankruptcy case and receive a discharge. Let’s take a look at what you can expect will happen in your Chapter 7 bankruptcy. 

Installment payments

If you can't pay the entire Chapter 7 bankruptcy filing fee and you don't qualify for a fee waiver, then you can apply to pay the filing fee in installments. You can ask to make four installment payments. The entire fee is due within 120 days after filing. If the bankruptcy court approves your application, it will grant an Order Approving Payment of Filing Fee in Installments. Your installment payment due dates will be in that order. You must pay all installments on time or your case is at risk of being dismissed.

Take course 2

You will complete a credit counseling course before filing bankruptcy. There's a second course you must take after filing bankruptcy. It covers personal financial management and can help you take advantage of your fresh start after erasing your debts through bankruptcy. You have to take this course after your case is filed but make sure it’s be completed within 60 days from the date of the meeting of creditors. A certificate of completion must be filed with the court.

Preparing for your meeting of creditors

The documents you'll have to give to the bankruptcy trustee depend on where you file your case. You'll receive correspondence from the trustee and most likely a list of documents to provide, such as copies of pay stubs and tax returns. You must comply with all reasonable requests from the trustee and within the time frame given. Your bankruptcy case will be dismissed if you don't submit documents requested by the trustee. 

Also, you're required to show a picture ID and evidence of your social security number at the meeting of creditors. It's best to have your social security card. If you can't find it, don't panic–you can order a replacement card and use another official document showing your social security number. 

Attend your meeting of creditors

You must attend your meeting of creditors, also known as the 341 hearing. Most filers find the meeting of creditors to be far less scary than it sounds. At this hearing you'll meet the trustee and be asked questions about the bankruptcy paperwork you filed. Your creditors are invited to attend, but most of the time they don't. The meeting typically lasts 5–10 minutes, is not held in a courtroom, and no judge will be present.

Once you have completed these steps, you’re eligible to receive a discharge in your Chapter 7 bankruptcy case. However, this does not mean that your case is over. What follows is an overview of some other items that may come up after your bankruptcy has been filed. 

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(4) Dealing with your vehicle

One of the forms you will file with the bankruptcy court is called the Statement of Intention. In this form, you tell the court what you plan to do with property that is securing a debt you owe, like real estate or a vehicle. 

If you own your vehicle but are still paying on the loan, you have a few options on how to deal with it in Chapter 7 bankruptcy. 

Reaffirmation

You can reaffirm the debt, keep your vehicle, and continue making payments. This means the debt will not be discharged and you will continue making monthly payments during and after bankruptcy. If you miss future payments the lender will have the right to repossess the vehicle and possibly try to collect on any deficiency between the balance you owe and the amount they get when selling the vehicle.

If you select this option in your Statement of Intention, your car lender will send you a reaffirmation agreement for you to complete and return. In some bankruptcy cases a reaffirmation hearing will be scheduled.

Surrender

If you choose to surrender your vehicle, then it will be repossessed and the debt will be discharged in your bankruptcy. Filers with high car payments they can't afford often choose to surrender their car to get out of the debt. 

The automatic stay stops creditors from repossessing a vehicle right after a bankruptcy case is filed. However, the stay expires 45 days after the meeting of creditors if the filer doesn't enter a reaffirmation agreement or redeem the property. Creditors can then repossess the vehicle without first filing a motion for relief from the automatic stay. 

Redemption

To redeem a vehicle in bankruptcy means to pay the lender the value of the car. To complete a redemption you will have to determine the vehicle's value and be able to pay that full amount. If your vehicle is worth significantly less than the amount you owe, consider redemption by getting a private loan from a family member or friend, or exploring a redemption loan at 722redemption.com

This option requires that you file a Motion to Redeem with the bankruptcy court. The redemption must be approved by the bankruptcy judge. You may have to negotiate the value of the vehicle with the original lender. You can do this either before or after you file the motion. The judge can decide the value of the vehicle if you and your lender can't agree on it. 

If you lease your vehicle, you have different options on how to deal with your vehicle in Chapter 7 bankruptcy. In your Statement of Intention you can choose to assume the lease to keep the car and continue making payments. Or, you can reject the lease, give back the car, and not have to make anymore payments on the lease. 

Car loans are handled differently in Chapter 13 bankruptcies. Filers are able to keep their vehicle and continue making payments through their Chapter 13 bankruptcy repayment plan. If they don't want to keep the vehicle, Chapter 13 filers also have the option to surrender the vehicle. 

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(5) Making changes to your bankruptcy forms

Your bankruptcy forms are filed under the penalty of perjury. When you file, you're declaring that the information in your bankruptcy forms is true and correct to the best of your knowledge. If you accidently leave something out or make a mistake, you'll need to make changes to your forms. This is done by filing an amendment with the court. You might need to file an amendment because you forgot to list an asset or creditor, you need to add information that was originally missed, you change your mind about signing a reaffirmation agreement, or the trustee requests that forms be amended. 

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(6) Dealing with creditors

Remember that the automatic stay stops creditors from being able to contact you or try to collect from you after you file for Chapter 7 or Chapter 13 bankruptcy. Even collection phone calls must stop immediately. 

Also, after you file bankruptcy your credit cards will be shut down. Even credit cards with a zero balance when you file will most likely be closed by the creditor. 

If you're planning to keep a secured debt, such as a car, you must continue making your monthly payments before, during, and after bankruptcy. Your car note lender will not be allowed to collect from you, so statements will no longer arrive and your ability to make online payments may be shut down. If so, you will have to mail in a check. 

Not all debts are dischargeable through bankruptcy. Non-dischargeable debts must be paid back after bankruptcy. Student loan debt, recent tax debts, back child support, and alimony arrears are generally non-dischargeable. 

Dischargeable unsecured debts, like credit card debt and medical debt, are generally automatically discharged in a successful bankruptcy. However, if a creditor objects to discharge, you’ll have to respond to their objection and tell the court why you believe the debt should be discharged. 

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(7) Cooperating with the trustee

Bankruptcy filers have an obligation to cooperate with the trustee throughout their bankruptcy case. Filers will need to provide the trustee with a copy of the tax return for the year the case was filed.

After the meeting of creditors the trustee will file a Report of No Distribution indicating that no funds are going to be distributed to your creditors or a Notice of Claims Bar Date stating the due date for creditors to file claims to receive funds in your bankruptcy. Other than these filings, ideally you will not hear from the trustee after the meeting of creditors. 

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(8) Negotiating with the trustee

Most Chapter 7 bankruptcy cases are what is called "no-asset" cases, which means everything the filer owns is protected through bankruptcy exemptions. Exemptions are specific to where cases are filed and vary by state law. Exempt property can't be taken from the filer.

Nonexempt property is not protected through Chapter 7 bankruptcy and can be taken by the trustee and sold to pay back your unsecured debt. If a bankruptcy filer wants to keep otherwise nonexempt property, they can usually pay the trustee the value of the property. This is generally an option because the creditors will ultimately get the same amount whether the nonexempt asset is sold by the trustee or is bought by the filer. 

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Conclusion 

This article mostly focuses on what happens after filing for Chapter 7 bankruptcy relief. The post-filing process for Chapter 13 bankruptcy is different and much more involved. You can get a free bankruptcy evaluation and learn more about your options. 

Certain things happen in every Chapter 7 bankruptcy, like being assigned a bankruptcy trustee and attending the meeting of creditors. Other things happen only in some cases, which depend on what the filer wants and what they own, like what they want to do with a vehicle or if there is a nonexempt asset they want to pay to keep. 

If you can’t afford to hire a lawyer, Upsolve will help guide you through the process of filing for Chapter 7 bankruptcy and provide you with an online tool to prepare your forms. If you work with a bankruptcy attorney, they will help you file your bankruptcy case. Check out our Learning Center to find out more and see how we can help you file for the debt relief you deserve. 

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Upsolve is a 501(c)(3) nonprofit that started in 2016. Our mission is to help low-income families who cannot afford lawyers file bankruptcy for free, using an online web app. Spun out of Harvard Law School, our team includes lawyers, engineers, and judges. We have world-class funders that include the U.S. government, former Google CEO Eric Schmidt, and leading foundations. It's one of the greatest civil rights injustices of our time that low-income families can’t access their basic rights when they can’t afford to pay for help. Combining direct services and advocacy, we’re fighting this injustice.

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