Overview of what to expect after declaring bankruptcy, including types of bankruptcy, the immediate debt relief benefits of filing bankruptcy, and important information about the Chapter 7 bankruptcy process.
Written by Attorney Andrea Wimmer.
Updated February 8, 2021
What Happens If I Declare Bankruptcy?
Deciding whether to file for bankruptcy can be very intimidating but know that you aren’t the only one trying to decide if filing bankruptcy is the right path. Oftentimes, bankruptcy is a last resort option that can relieve you from the financial burdens that are affecting your everyday life. No one wants to live paycheck to paycheck or be bombarded with calls from creditors every day. But, unfortunately, many Americans are in crippling debt, suffering from that very thing, with a lot of families just one flat tire or unexpected doctor visit away from complete financial ruin. If you’re still considering what type of debt relief will help you gain back control of your finances, you may be wondering what happens after you file bankruptcy. Continue reading below to find out:
3 Types of bankruptcy: Chapter 7, Chapter 13, and Chapter 11
When declaring bankruptcy, there are three types of bankruptcy you can file for. These include:
Chapter 7: Chapter 7 bankruptcy is the simplest and most common type. Chapter 7 bankruptcy results in a dischargeof the filer’s debts about 3 - 4 months after the case is filed with the Court.
Chapter 13: Chapter 13 bankruptcy allows the filer to reorganize their debts by making monthly payments for 3 - 5 years before eliminating what’s left unpaid at the end of the plan term.
Chapter 11: Chapter 11 bankruptcy is the least common type of bankruptcy filed by consumers. Similar to a Chapter 13, it reorganizes the filer’s debts by way of a court-approved plan. Mostly used by companies, Chapter 11 bankruptcy rarely presents a viable option for consumers.
After Declaring Chapter 7...
If you are an individual considering filing for bankruptcy, Chapter 7 bankruptcy will likely be the type of bankruptcy that can give you the relief you are looking for. Here is what to expect after filing for Chapter 7 bankruptcy:
As soon as your bankruptcy is filed with the Court the automatic stay will go into effect. The automatic stay is a part of theBankruptcy Code that prohibits your creditors from trying to collect money from you. Once the automatic stay is in effect, your creditors can’t call or otherwise contact you, and any collection actions that they might have pending against you must stop. If you’re subject to a wage garnishment at the time your case is filed, this has to stop starting with your first payday after filing.
Unfortunately, bankruptcy relief doesn’t come free. The Bankruptcy Court charges $338 to file for Chapter 7 bankruptcy. In addition to court filing fees, filers typically pay approximately $10 - $50 for each one of the two mandatory credit counseling courses. If your income is less than 150% of the federal poverty guidelines, you may be able to have both the court filing fee and the credit counseling course fee waived.
When filing for bankruptcy relief, you will have to fill out a number of different forms to provide all required information about your debts, assets, income, and expenses to the Court. These forms are the same across all of the United States and can be found online for free. Depending on the state you’re filing in, you may have to complete certain local forms required by the Court in your district as well.
You will be required to attend a meeting of creditors about 21 - 40 days after your case is filed. During the meeting, the bankruptcy Trusteehandling your case will ask you basic questions about your bankruptcy petition and financial situation.
Treatment of Assets
Once you have filed for Chapter 7 bankruptcy, your assets (everything you own) will be evaluated by the Trustee. Any unprotected assets may be sold by the Trustee to pay your creditors. Many assets are exempt from being used by the Trustee to pay your creditors. In 96 % of all Chapter 7 bankruptcy cases, no property is sold by the Trustee and no money is paid to creditors.
How Long Will Bankruptcy Take?
Once you’ve filed for Chapter 7 bankruptcy, it will take approximately 3 - 4 months for your discharge to be entered. If your Trustee tells the Court that there are no funds to distribute to your creditors, the case will be closed shortly thereafter. If your case is an asset case, because the Trustee is planning to sell a non-exempt asset, the case can stay open for more than a year while the Trustee completes the administration of your case.
Free Bankruptcy Help from Upsolve
At Upsolve, we understand that filing for bankruptcy with the help of a bankruptcy lawyer is not affordable for everyone, especially if those already struggling from crippling debt or subject to wage garnishment. That is why we offer free bankruptcy help for eligible individuals. If you want to see if you qualify, fill out our form here.