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The Liquidation Portion of the Bankruptcy Code

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People often ask me how long the bankruptcy process will take. How many hearings will there be? How will I know when my debts are officially discharged? When can I start to live again? The following is a general overview of a typical Chapter 7. The outline covers a typical Chapter 7  bankruptcy from the beginning to end. Hopefully, you will come away more informed and better able to understand the interactions between the debtor, your attorney and the bankruptcy trustee. At Leftwich Law, we are about empowering you to make informed decisions. If you want to speak with an attorney for a free consultation, call (602) 266-8080.
As this is only a general overview of the bankruptcy process it is important to remember that the schedule of events depicted below is for informational purposes only.  Events may occur in your bankruptcy case sooner or later than described here. The following time line is merely an approximation of the deadlines of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA).

Credit Counseling Class Requirement.

The bankruptcy filing process begins anywhere from six months to one day prior to actually filing for bankruptcy protection. This is the time a bankruptcy filer must take the Credit Counseling class. This is a requirement with limited exception, and has been in place since the new bankruptcy law was passed in 2005. Failure to complete a court approved Credit Counseling class within this time frame will result in being denied access to the bankruptcy court.

Proof of completion is shown by filing a certificate of counseling from a qualified credit counseling agency. Several counseling agencies are on line. Others provide counseling by telephone. The course is provided in many languages. The cost is usually around twenty-five dollars ($25.00) or less in some cases.  You have many options as to a course provider. Some providers will give you a discount if you take the second course with them as well. Assuming the bankruptcy filer has completed the Credit Counseling class the bankruptcy process can be commenced.

 Day 1              The Filing of the Bankruptcy petition with the Bankruptcy Court.  

  1. The starting point of all cases is filing a bankruptcy petition with the Bankruptcy Court.  All bankruptcy cases are filed on behalf of debtors by attorneys, are filed electronically. Debtors representing themselves must file their documents in person at the bankruptcy court. When you file for bankruptcy, the Bankruptcy Code prohibits your creditors from taking any action directed at collecting the debts you owe them (i.e., phone calls, sending bills, foreclosure, garnishment, repossession, etc.) without the Court’s permission. A federal protective order is “automatically” applied against your creditors. This is called the Automatic Stay. “Automatic” refers to immediacy (i.e., without any delay) that the injunctions and protective orders apply to your creditors. In other words, they are “Stayed” from attempting to collect a debt.
  2. When a petition is filed, the Court will assign a case number (e.g., 13-12345) and a Chapter 7 Trustee.  A longer bankruptcy case number may be the court’s official number with specific references such as 2:13-bk-12345. But essentially, “13” represents the year (i.e., 2013) The “12345” represents the number of bankruptcy case filed before you plus one +1. In other words, 13-001 would mean you were the first bankruptcy filing in your jurisdiction for that year. The Trustee’s job is to administer cases and to look for and liquidate any unprotected property for the benefit of debtors’ creditors. His “right” to stand in your shoes begins the very moment the case is filed.


Day 7-14              Receive Chapter 7 Trustee’s Request for Documents via U.S. Regular mail. 

The Trustee sends each debtor a form letter asking for bank statements, pay stubs, vehicle titles, tax returns, etc. Mail COPIES of the requested information to the Trustee as soon as possible after receiving it. If you fail to mail the information, he/she must bring copies to the meeting of creditors. PLEASE NOTE, in some cases a trustee may require the debtor’s attorney to send you the document request letter. It is important to check your mail while you are in the bankruptcy process.


 Day 10                 Deadline to File the Master Mailing List.

The master mailing list contains the names and addresses of all your creditors.  The Bankruptcy Court uses this list to notify your creditors of your bankruptcy case. Under the law all of your creditors deserve to know the fact that you filed for bankruptcy protection. Your creditors have important deadlines by which to file “proof of claims.” In some states, an omitted creditor may not be discharged. In other states an omitted creditor may still be discharged under certain circumstances. Nevertheless, it is import that you list everyone to the best of your knowledge. It is the law.

Day 14             Receive Notice of Chapter 7 Bankruptcy, Meeting of Creditors and Deadlines in the mail.

The Bankruptcy Court sends this Notice to you, your attorney and each of your creditors.  The most important thing to remember in the Notice is the date, time and location of the meeting of creditors scheduled in your case.  YOU (AND YOUR SPOUSE IF FILING JOINTLY) MUST ATTEND THE MEETING OF CREDITORS.

Day 15                Deadline to File Statements and Schedules.

If your statements and schedules are not filed within fifteen (15) days of filing your petition, your bankruptcy case will be dismissed.

6-8 Weeks            Meeting of Creditors.

  1. The purpose of the meeting of creditors is to allow the Trustee and your creditors to ask you about the information in the documents you filed with the Court. YOU MUST ATTEND, PROVIDE PHOTO IDENTIFICATION AND SHOW PROOF OF SOCIAL SECURITY NUMBER.  If you are absent, your case may be dismissed.
  2. Your meeting will usually last less than 15 minutes.  The Trustee will briefly go over your forms with you.  Your answers should be both truthful and consistent with your bankruptcy papers. However, you may freely amend your official forms to correct any errors.
  3. You will be asked whether you read and understood the Bankruptcy Information Sheet.

At this time you should take your second (2nd) Financial Management Course and provide the certificate to your attorney. Your attorney will then file the Certificate of Completion with the court. Failure to take a second counseling course will prevent the court from issuing you a Bankruptcy Discharge. Please note, if your case closes without discharge being granted, additional fees will be assessed to you before your case can be reopened and a Discharge obtained.

10 Weeks            Deadline for the Trustee to Object to Exemptions.

Under Arizona law certain property is declared to be exempt and cannot be taken by your creditors or the Trustee to pay your debts.  The Trustee must object to the exemptions you claim on your Schedule C if he or she disagrees with them.

14 Weeks           Deadline for Creditors to Object to Dischargeability of a Debt.

Under the Bankruptcy Code, some debts are dis-chargeable and some are not.  If a creditor believes, based upon the Bankruptcy Code, that a debt should not be discharged, the creditor must ask the Court to determine whether the debt should be discharged by filing a lawsuit in your bankruptcy case.

4 -6 months      You Receive Your Discharge in the Mail.

The Court grants your discharge and mails you a copy of the Discharge of Debtor(s). Consequently, you have a duty to inform the Bankruptcy Court if you move. If you are represented by counsel, your attorney will file a change of address with the Court. Some Courts provide you with the option to have the Discharged e-mailed to you. Check with the Court after filing your bankruptcy.

Completion of the Chapter 7 bankruptcy process is evidenced by the Discharge Order signed by the Federal bankruptcy Judge assigned to your case. This Discharge Order extinguishes, terminates, or otherwise ends your legal obligation to repay your debts. Please remember that some debts may not be dis-chargeable. Your attorney will advise which debts may not be dis-chargeable. But remember, you still have an obligation to co-operate with your Bankruptcy Trustee. Non-compliance will result in the Trustee asking the Judge to revoke your discharge.

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