Filing for Chapter 7 bankruptcy offers a fresh start, but the process involves several important steps. Here is what happens after you file.
Trustee and automatic stay
Once you file for Chapter 7 bankruptcy, the court assigns a trustee to manage your case. The trustee’s job is to oversee the sale of any non-exempt assets and distribute the proceeds to creditors. They also handle the administrative tasks related to your bankruptcy.
An automatic stay goes into effect immediately. This means creditors can no longer contact you to collect debts or pursue legal action. It stops wage garnishments and other forms of collection. If a creditor violates the stay, you can take legal action against them for damages.
Credit counseling and meeting of creditors
As part of the process, you must complete two courses: pre-petition credit counseling and post-petition financial management. You must complete these before the court discharges your debts. The trustee will schedule a meeting of creditors, also called a 341 meeting. During this meeting, the trustee will ask questions about your finances. Creditors may attend, but many choose not to.
Selling assets and discharging debts
If you have non-exempt assets, the trustee may sell them to pay off your creditors. If you have no non-exempt assets, your case will be a no-asset case. In this situation, the trustee will notify the judge, and the bankruptcy court will discharge your debts. The court cannot discharge certain debts, like child support or most student loans. Yet, Chapter 7 can eliminate unsecured debts like credit card balances.
Life after bankruptcy
Chapter 7 bankruptcy will stay on your credit report for up to 10 years, but it does not mean your financial future is bleak. Consulting with a bankruptcy attorney can help you understand your options and guide you through the process, ensuring you make the best decisions for your financial future.
Many people find that after bankruptcy, they can rebuild their credit and start fresh. You might face challenges, like higher interest rates, but the process gives you the opportunity to move forward without overwhelming debt.