The MLG Blog

How long does a chapter 7 take

October 14, 2009

How long will my case take from start to finish?

That is a very common question from clients, understandably they want to know when they get their “fresh start.”

While the timeline can vary greatly for different clients, generally if there is no real estate involved, or the client is giving up the home, the following timeline lays out the average experience of chapter 7 clients. All dates are calculated with the day of filing your case as day 1. Please refer to the earlier entry on “common terms used in a bankruptcy” for definitions used in this entry.

Pre-filing: The planning and preparation for filing can take the most time for a chapter 7 client. Delaying or accelerating the filing of your case can change the outcome of a chapter 7 greatly. An analysis of an individual’s situation is required to determine how much pre-bankruptcy planning needs to be done.

Day 1: Filing of your case. Your bankruptcy will be filed with the Bankruptcy Court. The automatic stay takes effect, preventing creditors from contacting you or repossessing property for the time being.

Day 4 or 5: Notice of first meeting of creditors is sent out by the court. This notice states when and where your meeting will take place.

Day 31: The first meeting of creditors takes place. The person(s) filing bankruptcy meet with their attorney and the trustee. The trustee will put the person(s) filing under oath and ask them general questions about their petition.

Day 60 to 90: Discharge order is signed. If the trustee doesn’t raise any issues with your bankruptcy the court will issue a discharge order. This order wipes away dischargeable debt.

Day 120 to 150: Order closing the case is signed.

As you will notice there is only one date in this generic timeline that requires the people filing to meet with the trustee. If everything goes smoothly the people filing bankruptcy will have long periods of time when they do nothing.

It is important to remember that your case could differ from this generic timeline. You should consult with an experienced bankruptcy attorney for an analysis of your individual situation.

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Chapter 7 bankruptcy basics

October 12, 2009

Chapter 7 Liquidation
A chapter 7 case is a liquidation case, your assets and debts will be gathered and listed on your petition and the trustee will be appointed and be charged with paying your creditors with your assets if possible

Chapter 7 places limits upon who can file based on the income of the debtor
If the debts are primarily consumer debt the debtor must pass a “means-test” before they are allowed to file a chapter 7
The test takes in to account monthly income and expenses and number of dependants in the family
If the debtor fails the means test they may be forced in to a chapter 13 bankruptcy
If the debts are primarily business debt the debtor does not have to pass a means test and generally any amount of debt can be discharged in chapter 7

Exemptions are applied to specific assets allowing the debtor to keep some property though the bankruptcy process
Please refer to the exemption list enclosed with this letter for all of the exemptions available to debtors

If an asset falls within one of the exemption categories and the value of that asset is below the exemption amount the debtor keeps the asset
If the value of the asset is above the exemption amount the debtor has 2 options
1) Pay the trustee for the amount over the exemption
2) Surrender the asset. The asset will then be sold and the debtor will get the exemption amount in cash from the sale of the asset.

After the petition is filed a “first meeting of creditors” is scheduled. This is commonly referred to as a 341 meeting because of bankruptcy code section 341 which mandates that this meeting take place.
The meeting is scheduled for a date around 30 days from when the petition was filed
The trustee puts the debtor under oath and asks questions relating to the petition that was filed
Generally these meetings are quick and easy and are over in about 5 minutes

Overall chapter 7 is more attractive to most debtors as they receive a discharge of the debts that are unpayable much quicker than chapter 11 or 13. If a business owner needs to file bankruptcy and does not wish to continue the business it is usually advisable to close the business down and file a chapter 7 for the individual.
Once a chapter 7 discharge has been ordered the debtor may not file another chapter 7 for eight years. However chapter 11 and 13 bankruptcies are usually available for a debtor that has filed a chapter 7 within the previous eight years
The cost of a chapter 7 varies depending upon the debtors situation, but as a very general rule chapter 7 bankruptcies will cost the debtor anywhere from $1500 to $3000 with a $299 filing fee. It is very important to remember that your costs may vary from this range

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