Step 6: The pleadings required for a Chapter 7 case generally consist of three main sections

1. Petition

This section contains basic information about the individual or entity filing Chapter 7, including name (and aliases), address, last four digits of social security number, and prior bankruptcy information

2. Schedules

The bankruptcy schedules contain the bulk of information regarding the filer’s assets, creditors and current financial situation:

Schedule A – Real Property (real estate)

Schedule B – Personal Property (all other property, tangible and intangible)

Schedule C – Exempt Property

Schedule D - Secured Claims (i.e. mortgages and car loans)

Schedule E – Unsecured Priority Claims (i.e. unpaid taxes, child support)

Schedule F – Unsecured Nonpriority Claims (i.e. credit card bills, medical bills)

Schedule G – Executory Contracts and Unexpired Leases

Schedule H – Co- debtors (i.e. guarantors and co-signors other than spouse in a joint case)

Schedule I – Current Household Income

Schedule J – Current Household Expenses

3. Statement of Financial Affairs

The Statement of Financial Affairs provides other information, such as:

• Year-to-date income and income for two years preceding bankruptcy filing

• List of creditors paid $6 or more in 90 days preceding bankruptcy filing

• Lawsuits and other administrative proceedings

• Gifts and charitable contributions made in year preceding bankruptcy filing

• Fire, theft, casualty and gambling losses

• Payments related to debt counseling or bankruptcy

• Information regarding property transfers

• Financial accounts closed within one year preceding bankruptcy filing

• Property held for others

• Prior addresses for three years preceding bankruptcy filing Information regarding non-filing spouse and former spouses Business information

Step 7: After filing

Within a few days after filing a petition with the Court, you will receive a document from the bankruptcy clerk’s office entitled “Notice of Chapter 7 Bankruptcy Case, Meeting of Creditors, & Deadlines”. All creditors and other entities listed in your creditor matrix will also receive this same notice.

This notice is very important and should be filed away in a safe and accessible place. The notice does the following:

• provides your bankruptcy case number and filing date

• provides the name and contact information for your Chapter 7 bankruptcy trustee

• sets forth the date, time and location of your Section 341 meeting of creditors

• notifies your creditors that most collection efforts must stop due to the automatic stay

• provides other deadlines, including the deadline to file a complaint objecting to discharge

• When you receive the notice, you should take the following steps

1. Review the name and the law firm of the Chapter 7 bankruptcy trustee.

Review your records to make sure you never retained the trustee or his firm to assist you in any matter, as well as verify that the trustee and his firm have never represented an opposing party’s interest, such as a collection action, against you Notify your free legal services officer immediately if you discover a conflict The trustee will then need to reject the case and it will be reassigned to another bankruptcy trustee This will also change the date and time of your Section 341 meeting of creditors

2. Review the notice for any actions that must be taken by you prior to the creditors’ meeting.

If the notice states that the presumption of abuse arises or that insufficient information has been filed to make a determination regarding presumption of abuse, contact your legal services cordinator.

Also, some jurisdictions use the notice to list documentation and other information that must be turned over to the Chapter 7 bankruptcy trustee prior to the Section 341 meeting Make sure that this information is provided to the trustee as soon as possible, and well in advance of the meeting date

3. Mark the date, time and location of the Section 341 meeting on your calendar and verify that there are no scheduling conflicts.

You must make arrangements with your employer to take time off of work, as well as to reschedule other appointments, in order to attend the creditors’ meeting If necessary, provide your employer with a copy of the notice as proof of your required Court appearance

Contact your legal services immediately if you have a valid scheduling conflict Your trustee usually only has one or two days a month scheduled for conducting 341 meetings, and therefore, rescheduling can be difficult Also, if the meeting of creditors is rescheduled, your free legal services officer must notify all parties on your creditor matrix of the new date and time

4. Make sure you have a valid form of Social Security Number and picture identification.

At the Section 341 meeting of creditors, your case trustee will examine your picture identification and verify that the Social Security Number listed on the Statement of Social Security Number previously filed with the Court is correct

For picture identification, usually a state-issued driver’s license or ID card is best

To verify your SSN, your bankruptcy trustee will need to review your original (not a copy) Social Security card In lieu of a Social Security card, your trustee may also accept an original W-2 form from your current employer or an original health insurance card with your SSN

The trustee will not accept your driver’s license or a copy of your tax return as valid proof of SSN

If the bankruptcy trustee is unable to verify your information or if the information provided to the Court is wrong, the Section 341 meeting of creditors will be continued to another date Depending on the reason for the continuance, other instructions may also be provided

5. Read the Bankruptcy Information Sheet:

At the Section 341 meeting, your Chapter 7 bankruptcy trustee must verify on record that you have received and read the Bankruptcy Information Sheet. Your attorney should have already provided this document to you.

6. Arrive early to the Section 341 meeting:

Double check the elate and time of the meeting of creditors Also, verify the location Plan to arrive early Factors, such as parking and traffic, may cause delays and should he considered

If you fail to arrive on time (or not at all), the bankruptcy trustee will either reschedule the 341 meeting or file a motion to dismiss It is unlikely that you will be able to convince the trustee to conduct the meeting if you are tardy Not only does the trustee have a full day of hearings to keep on time, but your attorney and any creditors that appeared may have left in your absence

7. Answer all questions honestly:

341 meetings generally only take about five minutes You will be questioned under oath, and your testimony will be electronically recorded In most Chapter 7 cases, very few, if any, creditors attend If any creditors attend, they will be allowed to examine you under oath after the trustee has completed his or her questioning

As stated earlier, it is a good idea to arrive early This gives you the opportunity to observe the questioning process before it is your turn The trustee has a list of required questions that he must ask every debtor Your trustee also prepares a list of questions based on his or her review of the bankruptcy documents

If, after listening to other meetings, you have reservations about your 341 meeting, pull your attorney aside to discuss your concerns Also, during the course of your hearing, ask for clarification if you do not understand a question Most importantly, relax – as long as you are honest, cooperative and respectful, your meeting of creditors should go smoothly

8. Comply with the bankruptcy trustee’s request.

At your meeting of creditors, your case trustee may also request that you send him or her additional documentation or that you turn over certain nonexempt assets Your trustee will probably send you a follow up letter with these same requests However, whether or not you receive a follow up letter, make sure you supply the trustee with all requested items as quickly as possible

9.  In addition to taking a pre-bankruptcy credit counseling course (see Part 3), the bankruptcy laws enacted in 201 require that debtors (with limited exceptions) take a pre-discharge bankruptcy education course from a government-approved debt counseling agency after filing a Chapter 7 bankruptcy petition and prior to receiving discharge.

Approved providers vary from state to state. Use the state links in the left column to locate an approved debt counseling agency in your area.

Other Pre-Discharge Bankruptcy Education Course Information

It typically costs $50 – $1 for pre-discharge bankruptcy education, but this fee may be waived depending on your ability to pay. If you are requesting a fee waiver, make sure it is requested and received from the debt conseling agency prior to the start of the session.

Atypical pre-discharge bankruptcy education course lasts approximately two hours and can take place in person, by telephone, or online. As part of its services, the debt counseling agency will provide information regarding developing a budget, managing money and using credit wisely, as well as a certificate of proof.

This certificate of proof must be filed with the Court before it will grant a Chapter 7 bankruptcy discharge.

Step 8: The Bankruptcy Liquidation Process

In a Chapter 7 bankruptcy proceeding, the trustee assigned to the case is responsible for liquidating any nonexempt assets This means that he or she will take possession of any assets with nonexempt equity, reduce them to cash, and then distribute the cash proceeds to creditors.

Many Chapter 7 bankruptcy cases are deemed “no-asset” cases In these types of cases, the bankruptcy trustee will abandon nonexempt assets after making a determination that the cash proceeds after liquidation are insufficient to warrant distribution to creditors

To make a determination regarding whether to proceed with bankruptcy liquidation, the trustee may request additional documentation or information so that he or she can investigate the value of nonexempt assets

If the bankruptcy trustee determines the value of nonexempt assets is sufficient for administration to creditors, he or she will decide the case is an “asset” case and will proceed with the bankruptcy liquidation process This process is subject to the rights of any secured creditors, as well as the debtor’s right to retain certain property pursuant to exemption laws

If you are reluctant to turn over an asset to the bankruptcy trustee, discuss your options with your attorney In some circumstances, the trustee may allow you to “purchase” the nonexempt asset from the bankruptcy estate For example, if you own a motor vehicle with $10 nonexempt equity, the trustee may allow you to keep the vehicle if you pay the nonexernpt portion of $10 to the bankruptcy estate

However, the trustee is not obligated to enter into such an agreement It is still imperative that you cooperate fully with the trustee and turn over any assets required for bankruptcy liquidation

Exemption laws vary from state to state, therefore it is best to talk to an attorney in your area to determine what items you may be required to turn over to the trustee for bankruptcy liquidation You may also want to check out the state links on the right for more information regarding bankruptcy Chapter 7 exemptions

Common examples of assets that are subject to Chapter 7 bankruptcy liquidation include:

• tax refunds

• bank account funds

• stocks and bonds

• motor vehicles

• real estate

• jewelry

• antiques and collectibles

•  cash value of some life insurance policies, proceeds of certain types of lawsuits,  other personal property

The bankruptcy trustee will also investigate payments and transfers to creditors and other third parties. In some circumstances, he or she may determine that these are also assets of the bankruptcy estate and demand turnover from the creditor or other third party.

The actual liquidation process varies based on the type of asset that is turned over to the bankruptcy estate. Tax refunds, for example, are liquidated by depositing the refund check into the bankruptcy estate’s bank account. Motor vehicles and other personal property, however, may require that the trustee schedule a bankruptcy auction and provide notice to all parties on the creditor matrix.

Step 9:

The Chapter 7 bankruptcy trustee assigned to a case is responsible for liquidating any nonexempt assets If he or she determines the case is an “asset” case, they will proceed with the liquidation process Although the debtor’s participation in the liquidation process is minimal, it can be a major source of concern and confusion The case can drag out for months, and sometimes even years, as the Chapter 7 bankruptcy trustee works to liquidate assets and distribute payment to creditors To add to the confusion, the debtor will likely receive written notices when the trustee takes certain actions

Distribution of Nonexempt Assets to Creditors

The liquidation process varies from case to case, but there are a few key things that happen. Following is a basic outline of the steps taken in a standard liquidation:

1. A demand turnover of nonexempt asset(s) will be issued.   

After the commencement of the case, the trustee assigned to the case may demand turnover of certain assets. This is explained in more detail in step 5 above.

2. An inventory and request for notice will be filed with the Court.

After the Chapter 7 bankruptcy trustee makes a determination that assets will be liquidated for the bankruptcy estate, he or she will file a document with the Court listing the potential assets and requesting that the bankruptcy clerk notify creditors and set a claim deadline.

3. The Clerk’s office will mail a proof of claim form to all entities listed on the creditor matrix and set a claim deadline.

Creditors must complete a proof of claim form and return it to the Court by the deadline to be eligible to receive any distributions from the liquidated assets.

4. The Chapter bankruptcy trustee will review claims:

After the claims bar deadline expires, the trustee will review all proofs of claim filed in the case. If a determination is made that a claim is insufficient or incorrect, he or she will either request additional documentation from the creditor or file an objection.

After all proof of claim issues have been resolved, the bankruptcy trustee will file a document with the Court listing allowed claims.

5. An application for compensation will be filed with the Court.

A Chapter 7 bankruptcy trustee receives a commission based on the amount of money collected for the bankruptcy estate. In order to be paid this commission, the he or she must file an application for approval requesting that the Court enter an order allowing the payment. The commission is paid from the bankruptcy estate’s account.

When the case is closed, the bankruptcy trustee also receives a portion of the Chapter 7 bankruptcy filing fee. This amount is paid regardless of whether any assets were liquidated.

6. The final report will be filed.

The trustee must prepare and file a final report before final distribution to creditors can be made. Among other requirements, the final report lists how the trustee plans to disburse funds. In most circumstances, a summary of the final report must be provided to creditors, and a deadline for any objections will be set.

7. Bankruptcy estate funds will be distributed.

If no objections to the final report are filed, the trustee will proceed with distributing funds to creditors based on the allocation included in the final report.

8. The Chapter 7 bankruptcy trustee will file a final account.

After all bankruptcy estate funds have been disbursed and the checks have cleared, the trustee will file a final account. This is usually the last action taken before the case is closed.

9. Other pleadings.

In addition to the above, the bankruptcy trustee may also file other pleadings based on the individual circumstances of each case and local rules. Common examples include:

• applications to employ professionals (i.e. realtors, auctioneers, accountants, lawyers)

• motions to sell assets (by auction, private sale, etc.)  motions to compel

• preference complaints

The main reason one goes through the Chapter 7 bankruptcy process is in order to receive a Chapter 7 bankruptcy discharge When a debt is discharged, the debtor is no lonqer legally required to pay the debt

Step 10: Chapter 7 Bankruptcy Discharge – What Doesn’t Get Discharged

Not all types of debt are dischargeable. If a debt is not discharged, the debtor is legally obligated to repay it. For almost every rule, there is an exception, so talk to your attorney regarding what debts will or will not be discharged for your particular situation.

Examples of debts that are generally not subject to a Chapter 7 bankruptcy discharge include:

• most taxes and tax-related debts

•  debts for domestic support obligations, such as child support and alimony

• most student loans

•  governmental fines and penalties

• debts for malicious or willful injury to others or others’ property, such as criminal restitution

• debts resulting from personal injuries caused by driving while intoxicated A debts owed to most tax-advantaged retirement plans

Chapter 7 Bankruptcy Discharge Timeline

A Chapter 7 bankruptcy discharge is generally entered approximately four months after the bankruptcy petition is filed. Entry of the bankruptcy discharge may be delayed for various reasons, including the following:

 the failure of the debtor to comply with bankruptcy requirements, such as attending a pre-discharge bankruptcy education course:

• a complaint objecting to discharge filed by a creditor or other interested party;

• a motion to extend time to file complaint objecting to discharge filed by the bankruptcy trustee or other party (for example, in an effort to make the debtor cooperate or to turn over assets);

• a pending motion to dismiss (for example, if bankruptcy fraud or abuse is under investigation).

Bankruptcy Discharges – Other Issues

A Chapter 7 bankruptcy discharge may also be revoked after it is granted. For example, if the debtor fails to turn over an asset to the bankruptcy estate, the trustee may file a complaint to revoke the debtor’s discharge for failure to cooperate.

Although the debtor is not legally obligated to pay a debt after it is discharged, he or she may voluntarily repay any discharged debt. The creditor then may accept or reject the payment at its own discretion.