How Personal Bankruptcies Work and What Happens After Filing

After filing for personal bankruptcy, the court will freeze most of your financial assets, and you’ll be granted an automatic stay (meaning creditors cannot pursue your debts). From there, the court will assign your case to a trustee, and that person will organize a Meeting of Creditors to alert them of your filing.

If you’re considering filing for Chapter 7 or 13 bankruptcy, you might be wondering what happens after you formally file. It’s an important distinction to make: once you’ve taken the step of legally filing for bankruptcy, you are subject to several legal and other proceedings that you must abide by.

Bankruptcy can help individuals and businesses manage their debt by eliminating all or part of it, allowing them to repay a portion of what they owe. Those considering filing for personal bankruptcy in Arkansas should take careful note to read the following to understand better what follows the first step.

Your Initial Situation with Creditors

Once you file for Chapter 7, you’re assigned a case number and bankruptcy trustee. The trustee will oversee your filing, review your forms, and may ask for additional documentation depending on the initial submission. The trustee will handle the Meeting of Creditors, an open call for those you may owe unsecured debts (like credit card companies). Their involvement will depend on how much you actually owe. It’s important to understand that Chapter 7 filers lose property in most cases, and the negative bankruptcy information remains on your credit report for ten years from the filing date. You cannot re-file for bankruptcy under this chapter for eight years.

What is an ‘Automatic Stay’ in Personal Bankruptcy?

Once your Chapter 7 or 13 filing is formalized, you’ll be granted an “automatic stay,” which offers protection from all creditors and others to whom you owe money. They cannot take collection action against you and any wage garnishment must stop.

Your credit cards will freeze (including any that have a zero balance). You will be unable to secure any other loans during the bankruptcy process. The chief goal will be to get you on a path to repayment or the quickest possible liquidation of your assets to get you on some path towards financial rehabilitation.

Filing for bankruptcy will initially lower your credit score, and the action will remain on your credit report for ten years in the case of Chapter 7 or an uncompleted discharge and seven years for Chapter 13.

Personal Bankruptcy Filing Fees

There are fees associated with the filing and any legal fees that your bankruptcy attorney may charge. You can pay this filing fee in installments, and the court would approve that. The court could dismiss your case if all payments are not made on time and in full.

The court may also recommend taking a credit counseling course to educate you on appropriate financial rebuilding post-bankruptcy.

A Note About Student Loans in Personal Bankruptcy

Formerly, there was a hard block on discharging student loans through bankruptcy. Through the various relief bills of the COVID-19 pandemic and an increased understanding of the depth of the student loan debt situation nationwide, some courts are now allowing borrowers to pursue student loan debt discharge. While this is not in effect everywhere, it is something to watch and consider for those with exceptionally high balances (over $100,000 with no realistic long-term repayment options).


If you’re ready to file for a Chapter 7 or 13 bankruptcy in Arkansas, you should certainly enlist the advice and consultation of a knowledgeable bankruptcy attorney. The team at Natural State Law, PLLC understands the overwhelming nature of the process and is the professional source Little Rock clients trust. Call us today at 501-916-2878 to schedule a free consultation.