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The Chapter 7 Bankruptcy Process: What to Expect

Bankruptcy law is highly nuanced, with many specialized local practices which vary by district. For these reasons, it is recommended that you seek out legal assistance to go through this process.

Pre-Filing Considerations:

Before your case can be filed, all individuals must complete a credit counselling course, and obtain a certificate of completion. This mandatory counseling session aims to equip individuals with the tools and knowledge necessary to make informed decisions regarding their financial future. Additionally, gathering pertinent financial documentation, such as income records, asset inventories, and debt statements, facilitates the filing process, ensuring accuracy and compliance with legal requirements. The pre-bankruptcy course takes about thirty-five minutes to complete. It can be taken online or over the phone and is offered by a variety of approved providers. Your attorney will connect you with an approved provider to complete the course, allowing your case to be filed.

Filing and Documentation:

Your attorney will ask you to provide a host of financial documentation. This is required, not only to be provided to the Chapter 7 Trustee upon filing, but it will allow your attorney to prepare your case, based upon your personal financial history. By providing all required documents to your attorney, you ensure accurate and thorough completion of the bankruptcy forms which will serve as your case. It is important to note that any discrepancies or omissions may delay proceedings or jeopardize your eligibility for debt relief. It is of paramount importance to provide a full and accurate disclosure of all assets and all liabilities to your attorney.

Meeting of Creditors:

After your Chapter 7 bankruptcy is filed, individuals are required to attend a meeting of creditors, also known as a 341 meeting. This meeting, overseen by a court-appointed trustee, provides creditors with an opportunity to ask pertinent questions regarding their financial affairs. While creditors have the right to attend and participate in the meeting, it’s essential to note that hostile or confrontational interactions are rare. Instead, the meeting typically serves as a procedural step in the bankruptcy process, allowing for transparency and accountability in resolving outstanding debts. These hearings take place over Zoom.

Asset Liquidation and Debt Discharge:

A defining feature of Chapter 7 bankruptcy is the ability of a Chapter 7 Trustee to liquidate non-exempt assets to satisfy creditors’ claims. Upon completion of the meeting of creditors, the trustee assumes responsibility for administering assets of the estate, selling any non-exempt assets and distributing proceeds to creditors accordingly. While the prospect of asset liquidation may evoke apprehension, it’s important to recognize the protective measures afforded by exemption laws, which safeguard essential assets such as homes, vehicles, and personal belongings. Your bankruptcy attorney will provide you with reasonable and realistic expectations of whether you might stand to lose assets before your case is filed. If you do have known equity in assets that cannot be protected, you may elect to proceed under a different chapter of bankruptcy. Most chapter 7 cases do not result in liquidation, because knowledgeable and experienced bankruptcy attorneys will point out any risks prior to filing your case. Whether or not a Chapter 7 case results in the liquidation of assets, individuals who have not committed fraud are provided with a discharge of eligible debts, and a fresh financial start, free from overwhelming financial burdens.

Post-Bankruptcy Considerations:

A discharge order is typically entered in the case two months after the 341 hearing. While the discharge of debts generally marks the culmination of the bankruptcy process, it also signals the beginning of a financial chapter. After completing bankruptcy, it is important to focus on rebuilding your financial health and restoring your creditworthiness. This entails adopting prudent financial habits, such as budgeting, saving, and engaging in responsible credit management. Protect and improve your new credit by living in a financially responsible manner, within your own means. Setting limits will allow you to lay the groundwork for long-term financial stability. Additionally, seeking guidance from financial professionals and credit counselors can provide invaluable support and guidance as you navigate the post-bankruptcy landscape.

Navigating the Chapter 7 bankruptcy process requires diligence, patience, and a comprehensive understanding of its intricacies. WBK Bankruptcy, powered by Wolfson Bolton Kochis PLLC, is here to help metro Detroiters navigate this process with confidence.

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