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1. Filing of the Petition

All Bankruptcies (no matter under what Chapter) begin with the filing of a petition. One of four kinds of petitions will be filed:

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1. Voluntary Petition for Individuals Filing for Bankruptcy

2. Voluntary Petition for Non-Individuals Filing for Bankruptcy

3. Involuntary Petition Against an Individual

4. Involuntary Petition Against a Non-Individual

As their names imply, a voluntary petition is filed by the debtor. On the other hand, creditors (people you owe money to) would file an involuntary petition.​

3. Notice of Bankruptcy 

After the bankruptcy court received your petition, the clerk will issue a notice to all creditors named in the petition to let them know that you have filed and which chapter you are filing under. The notice usually reached creditors within 10 days of filing the petition.

4. Credit History is Updated

After the petition is filed, your credit score will be impacted. Filing for bankruptcy can have a significant impact on your credit score. The exact effect will depend on your credit history before filing and the type of bankruptcy you choose (Chapter 7 or Chapter 13). Here's what you can generally expect:

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 In Chapter 7 bankruptcy, most of your unsecured debts are discharged, meaning you are no longer legally obligated to repay them. This process usually takes several months to complete. As a result of Chapter 7 bankruptcy:

• Credit Score Drop: Your credit score will likely experience a significant drop. The extent of the drop can vary, but it's not uncommon for credit scores to decrease by 100 to 200 points or more.

• Bankruptcy Record: A Chapter 7 bankruptcy will remain on your credit report for up to ten years from the date of filing. Potential creditors and lenders will be able to see this record, which can affect their willingness to extend credit.

• Limited Credit Access: After bankruptcy, obtaining new credit may be challenging, and any credit you can get might come with higher interest rates and less favorable terms.

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Chapter 13 Bankruptcy: Chapter 13 bankruptcy involves creating a court-approved repayment plan to pay off a portion of your debts over three to five years. While the impact of Chapter 13 bankruptcy on your credit score is generally less severe than Chapter 7, it still has significant consequences:

• Credit Score Drop: Your credit score will likely decrease, although the drop might not be as substantial as with Chapter 7 bankruptcy.

• Bankruptcy Record: A Chapter 13 bankruptcy will remain on your credit report for up to seven years from the date of filing.

• Repayment Plan: The fact that you are in a Chapter 13 repayment plan will be visible on your credit report, which could affect potential lenders' decisions.

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It's important to understand that while bankruptcy has a severe impact on your credit score and credit history, the effect is not permanent. Over time, as you demonstrate responsible financial behavior, the negative impact of bankruptcy on your credit score will diminish. You can begin rebuilding your credit by using secured credit cards, making timely payments, and keeping your credit utilization low.

Bankruptcy provides a fresh financial start for many individuals who are overwhelmed with debt; but, before deciding to file for bankruptcy, it's essential to consult with a qualified bankruptcy attorney and explore all available options.

7. Working with the Trustee

It is the Trustee's main task in bankruptcy to gather the assets of the debtor and distribute them to creditors. Therefore, being transparent and cooperative with the Trustee is an essential part of having a smooth and successful bankruptcy case. Therefore, you should:

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1. Be Responsive: Respond promptly to any requests or communications from the trustee. This may include providing necessary documents, financial information, or attending meetings as required.

2. Provide Accurate Information: Ensure that all the information you provide to the trustee is accurate and complete. Any discrepancies or omissions may raise concerns and potentially complicate the bankruptcy process.

3. Attend the Meeting of Creditors: If you are the debtor, attend the 341 meeting (Meeting of Creditors) as scheduled by the trustee. Be prepared to answer any questions the trustee may have about your financial situation and bankruptcy documents.

4. Cooperate in Asset Valuation: In Chapter 7 bankruptcy, the trustee may need to value and sell certain assets. Cooperate with the trustee in providing information about these assets to facilitate their proper valuation.

5. Comply with the Repayment Plan (Chapter 13): If you are in Chapter 13 bankruptcy, make sure to adhere to the court-approved repayment plan. Submit your payments to the trustee on time and as specified in the plan.

6. Be Honest and Transparent: Be honest and open with the trustee about your financial situation. Hiding or misrepresenting assets, income, or debts can lead to serious consequences.

7. Consult with an Attorney: If you are uncertain about any aspect of the bankruptcy process or have concerns about working with the trustee, consider consulting with a bankruptcy attorney. They can provide legal advice and help you navigate the complexities of bankruptcy law.

8. Address Trustee's Concerns Promptly: If the trustee raises any issues or concerns related to your bankruptcy case, address them promptly and provide any additional information or documentation if required.

9. Understand the Trustee's Role: Familiarize yourself with the trustee's role and responsibilities in the bankruptcy process, so you know what to expect and can work together more effectively.

10. Stay Organized: Keep all bankruptcy-related paperwork and communication in order. Being organized can make it easier to respond to trustee requests and maintain accurate records throughout the process.

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Remember that the trustee's primary goal is to ensure a fair and equitable distribution of assets to creditors and adherence to bankruptcy laws. By cooperating and being forthcoming, you can help facilitate a smoother bankruptcy process and increase the chances of a successful resolution to your case.

2. The Automatic Stay Goes Into Effect

The automatic stay in bankruptcy is a crucial legal protection that goes into effect automatically as soon as an individual or business files for bankruptcy. It is one of the most significant benefits of seeking bankruptcy relief and is designed to provide debtors with immediate relief from their creditors' collection efforts.

When a bankruptcy case is filed, the automatic stay immediately halts almost all collection actions by creditors against the debtor or the debtor's property. Here are some of the key effects of the automatic stay:

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1. Creditor Actions: Creditors are prevented from continuing or initiating any legal actions against the debtor to collect their debts. This includes lawsuits, wage garnishments, foreclosure proceedings, repossessions, and other similar actions.

2. Harassment: Creditors must stop all attempts to contact the debtor, including phone calls, letters, and other forms of communication seeking payment.

3. Utility Services: If utility services are at risk of being terminated due to unpaid bills, the automatic stay may provide temporary protection, giving the debtor time to address the issue within the bankruptcy process.

4. Evictions: If the debtor is facing eviction, the automatic stay may provide temporary relief, though there are some exceptions for certain types of evictions.

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It's important to note that the automatic stay is not applicable to all types of debts or legal actions. Some debts, such as child support obligations, most tax debts, and criminal proceedings, are not subject to the automatic stay. Additionally, if a debtor has filed bankruptcy multiple times within a short period, the automatic stay's duration may be limited or not apply at all.

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Creditors can also seek relief from the automatic stay under certain circumstances. For example, if a creditor believes that the debtor has no equity in the property and there is no benefit to the bankruptcy estate, they can request the court to lift the automatic stay to proceed with foreclosure or repossession.

5. Financial Management Course

Before you can officially have your debts discharged in Chapter 7 bankruptcy, you will have to complete a financial management course and show proof that you did so. You should get the certificate of completion to the Trustee prior to the meeting of creditors, which is explained below.

6. Meeting of Creditors (§ 341 Meeting)

Shortly after filing your petition, the case will be assigned to a Trustee to handle the matter. The Trustee will then send notice of a meeting of creditors. This meeting (also known as the "Meeting of Creditors" or the "Section 341 Meeting,") takes its name from Section 341 of the Bankruptcy Code, which requires the meeting to be held for both Chapter 7 and Chapter 13 bankruptcy cases.

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The primary purpose of the 341 meeting is to provide an opportunity for the bankruptcy trustee, creditors, and the debtor to meet and discuss the bankruptcy case. The meeting allows the trustee and creditors to ask the debtor questions regarding their financial affairs, assets, debts, and other relevant information. It is not a court hearing, and the bankruptcy judge does not typically preside over this meeting.

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The key participants in the 341 meeting include:

1. The debtor(s): The individual or entity filing for bankruptcy.

2. Bankruptcy trustee: An appointed representative responsible for overseeing the bankruptcy case, ensuring compliance with bankruptcy laws, and administering the bankruptcy estate.

3. Creditors: While creditors have the right to attend the meeting, they are not always present. If they do attend, they may ask questions related to the debtor's financial situation and assets.

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During the meeting, the debtor is placed under oath and must answer questions truthfully. The trustee typically asks about the accuracy of the bankruptcy petition, financial affairs, assets, income, and debts. Creditors, if present, may ask questions related to their claims or the debtor's financial circumstances.

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​Once the meeting is concluded, and the trustee is satisfied with the information provided, the bankruptcy case will continue to progress. For Chapter 7 cases, the trustee will begin the process of liquidating any non-exempt assets and distributing the proceeds to creditors. In Chapter 13 cases, the repayment plan will move forward for court approval and implementation.

8. Closing the Case

A bankruptcy case can end in different ways, depending on the type of bankruptcy and the specific circumstances of the debtor. Generally: 

Chapter 7 Bankruptcy:

• Discharge: In a Chapter 7 bankruptcy, the most common outcome is a discharge. A discharge is a court order that forgives the debtor of most of their debts, making them no longer legally obligated to repay those debts. The discharge effectively ends the bankruptcy case, typically a few months after the initial filing.

• Asset Case Closure: If the bankruptcy estate includes non-exempt assets that the trustee has liquidated (sold), the case remains open until the trustee completes the distribution of funds to creditors. Once this process is finished, and any remaining administrative tasks are resolved, the case will be closed.

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Chapter 13 Bankruptcy:

• Completion of Repayment Plan: In Chapter 13 bankruptcy, the case concludes when the debtor completes the court-approved repayment plan. The debtor must have made all required payments to the trustee, which usually spans over three to five years. Once the plan is successfully completed, the remaining dischargeable debts are discharged, and the case is closed.

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Dismissal:

• A bankruptcy case may be dismissed before reaching a discharge if the debtor fails to comply with the court's requirements, fails to make necessary payments (in Chapter 13), or if it is discovered that the debtor filed for bankruptcy in bad faith. Dismissal terminates the bankruptcy without a discharge, and creditors can resume their collection efforts

Conversion:

• Sometimes, a bankruptcy case may be converted from one chapter to another. For example, if a debtor is initially in Chapter 13 but later realizes they cannot continue with the repayment plan, they may convert to Chapter 7. Similarly, a debtor in Chapter 7 may convert to Chapter 13 if they want to protect certain assets.

Denial of Discharge:

• In some cases, the court may deny a debtor's discharge if they have engaged in fraudulent activities, failed to disclose information, or committed other types of bankruptcy fraud.

Death of the Debtor:

• If the debtor passes away during the bankruptcy process, the case may be closed, and the discharge may or may not be granted depending on the circumstances.

It's important to note that bankruptcy cases involve legal complexities, and the outcome of a particular case can be influenced by various factors. If you're considering bankruptcy or are already involved in a bankruptcy case, it's wise to consult with an experienced bankruptcy attorney who can guide you through the process and help you understand how your specific case may conclude.

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