What Should I Expect During the Bankruptcy Procedure?

Identify and Organize Your Records

Bankruptcy is a legal procedure in which the debtor files a petition seeking relief in the bankruptcy court of the applicable federal district. Most bankruptcies are voluntarily filed by the debtor. Prior to filing the petition, the debtor must gather, organize, and analyze all financial information, including all related financial documents. Follow this link for our checklist to help identify and organize your records for bankruptcy.

Attorney Review of Financial Information & 341 Hearing

It is essential that debtors have their financial information reviewed by a competent attorney prior to filing bankruptcy. The debtor is required by law to include all financial information in the petition. The attorney should be able to appropriately analyze the debtor’s financial information and identify issues that may result in unintended consequences during the bankruptcy such as dismissal without discharge, loss of assets, or unintended debt obligations following bankruptcy.

If the attorney feels that bankruptcy is appropriate after analyzing the debtor’s financial information and identifying and explaining any potential issues to the debtor, the attorney will file the bankruptcy petition with the bankruptcy court. Upon filing the petition, the court will schedule a 341 creditor meeting for the debtor to attend with his/her attorney. The creditor meeting is presided over by a bankruptcy trustee appointed by the court. The trustee’s function is to review the petition and question the debtor in person to establish that the information contained in the petition is true, correct, accurate, and complete.

All creditors are put on notice at the time the petition is filed and are permitted to attend and ask relevant questions of the debtor at the 341 creditor meeting. Creditors rarely attend the meeting. The trustee and/or creditors have the ability to seek additional information and documents from the debtor using methods similar to any other court proceeding, i.e. written requests, depositions, etc.

Discharge of Debts for Chapter 7 or Acceptance of Repayment Plan for Chapter 13

Assuming the trustee and/or all creditors are satisfied with the petition and testimony of the debtor, the debtor will likely receive the relief sought by the bankruptcy court. In a Chapter 7 that likely means a discharge of outstanding debt and permanent injunction preventing collections. In a Chapter 13 that likely means acceptance of the proposed repayment plan. This relief is usually obtained within several months following the debtors 341 creditor meeting.

If there are disputes between the debtor and the trustee/creditors, the debtor may have to argue their position before the bankruptcy judge. Disputes may result in negotiations and/or settlement with the applicable trustee/creditors before or after the decision by bankruptcy judge. Also, disputes are rare and should be properly analyzed by the attorney before the bankruptcy petition is filed.