What Happens When You Declare Bankruptcy
Declaring bankruptcy is often the last resort for an individual or business when they need to buy some time and stop creditors from taking drastic measures. If you are currently in the position of considering this route to solving your debt problems, you need to know more about what happens when you file bankruptcy. To find out if this is the right choice for your situation, contact a bankruptcy lawyer for a consultation.
During the consultation, the lawyer will explain the different types of bankruptcy and recommend the best option for you. You’ll hear about Chapter 7, 11, or 13 bankruptcies and find out which one applies to your situation. Once this decision is made, the process is pretty straightforward. Here is a breakdown of what you should expect after filing your petition.
What Happens Once Your Bankruptcy Case is Filed?
All that paperwork your attorney asked for has a purpose. These documents will be filed with the local bankruptcy court. The clerk of court will review the documents and determine whether any more information is required. You will be notified if more documents are needed and you must comply with this request by the deadline listed. Otherwise, your case will be dismissed.
When your case is finally filed, you’ll be assigned a case number and a trustee. The creditors you listed will be notified of the pending bankruptcy. This prevents any further action by the creditors to collect on the debt. You won’t have to worry about wage garnishments or foreclosures from this point on.
Should You be Worried About the Meeting of Creditors?
About 30 to 45 days after your case is filed, a required “341 meeting of creditors” is held. Most people are nervous about this meeting, but it is simply a procedure that allows your trustee and creditors an opportunity to ask questions about your assets, liabilities, and other matters that pertain to your case. Some of the basic questions you can expect are:
- State your name and current address.
- Do you have a picture ID and Social Security number available?
- Is this your signature on the petition and other related documents?
- Are you familiar with the information in the supporting documents?
- Are there any errors or omissions you wish to correct?
- Have you filed bankruptcy before?
Of course, there may be other questions not included above, but these should give you an idea of how this meeting with the creditors will proceed. In many cases, the creditors don’t come, and the meeting is over within minutes.
What Can Go Wrong?
If everything goes in your favor, you should get notice of discharge within 90 days after meeting with the creditors. In most cases, no objections arise, and you’re home free. However, creditors and the Trustee have the right to object to your filing for bankruptcy. This can happen if they suspect false information on the bankruptcy petition, deliberate charges on credit cards with the intent to file bankruptcy or any damages or deaths caused by driving under the influence.
Other things that go wrong with bankruptcy include the damage to your credit score. Chapter 7 and 11 bankruptcies remain on your credit for ten years, and Chapter 13 remains for seven years. The higher your credit score, the more it will fall. For instance, someone with a FICO score in the mid 700s could see their score drop by over 100 points.