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 3, 2022
Deciding whether to declare personal bankruptcy can be very intimidating but know that you aren’t the only one trying to decide if bankruptcy is the right path for you. Oftentimes, filing 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 your bankruptcy is filed.
Here’s What To Expect After You Declare Bankruptcy…
Creditors Have To Stop Contacting You
As soon as your bankruptcy is filed with the Court the automatic stay will go into effect. The automatic stay is a part of the Bankruptcy 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.
You Attend Your Creditors’ Meeting
You will be required to attend a meeting of creditors about 21 - 40 days after your case is filed. During the meeting, the bankruptcy trustee handling your case will ask you basic questions about your bankruptcy petition and financial situation.
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.
You get your fresh start in the form of a bankruptcy discharge
Approximately 60 days after your creditors' meeting, the bankruptcy court will grant your discharge. At that time, you'll have completed all bankruptcy law requirements to have your debts eliminated. Bankruptcy affects unsecured debts and secured debt but some debts can't be discharged. Certain priority debts like alimony, recent tax debts, and other priority liabilities survive your Chapter 7 bankruptcy.
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How Long Does 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 however long it takes for the trustee to complete the administration of your case.
The most important thing that happens when you declare bankruptcy is the automatic stay protections kick in. This prevents creditors from trying to collect from you while the bankruptcy case is pending. Unless your case is complicated, everything that happens after you declare follows a set course that's pretty much the same for every consumer.