If you’re considering filing for Chapter 7 or 13 bankruptcy, you might be wondering what happens after the case is filed. It’s an important distinction to make: once you’ve taken the step of legally filing for bankruptcy, a number of factors come into play.
Bankruptcy is designed to help individuals and businesses manage their debt by eliminating all or part of it or helping them repay a portion of what they owe.
Your Initial Situation with Creditors
Once you file for Chapter 7, you’re assigned a case number and bankruptcy trustee. The trustee will administer your case, review your forms, and may ask for additional documentation depending on what was initially submitted. The trustee will conduct the Meeting of Creditors, which is an opportunity for your creditors to question you. Their involvement will depend on how much you owe and the character of the debt. It’s important to understand that in some cases, Chapter 7 filers will have non-exempt property, and that property will be administered and sold in order to pay creditors. A bankruptcy case filing remains on your credit report for ten years from the filing date. You cannot re-file for bankruptcy under this chapter after receiving a Chapter 7 discharge for eight years from the date of filing.
What is an ‘Automatic Stay’?
Once your Chapter 7 or 13 petition is filed, 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, any lawsuits in progress must stop, and any wage garnishments must also stop.
Credit cards will be shut down, including cards that have a zero balance. You will be unable to obtain any other loans during the bankruptcy process and 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 sort of path towards financial rehabilitation.
Filing for bankruptcy will initially lower your credit score and the action will remain on your credit report for 10 years in the case of Chapter 7 or an uncompleted discharge and 7 years for Chapter 13.
Bankruptcy Filing Fees
The bankruptcy court requires the payment of a fee with the filing of a case. You can pay this filing fee in installments and that would be approved by the court. The court will dismiss your case if all payments are not made on time and in full. Depending on your situation and the type of bankruptcy you file, your attorney may require up-front payment of attorney fees or may allow the attorney fees to be paid over time.
A Note About Student Loans
It has traditionally been extremely difficult to discharge 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 taking a less hard-line approach to borrowers pursuing 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, you should definitely 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 are the professional source Little Rock clients trust. Call us today at 501-916-2878 to schedule a free consultation.