If you are struggling financially and unable to make progress in paying down your debts, you may want to consider filing for Chapter 7 bankruptcy. It is a legal option that has helped many people clear their debt and get back on their feet financially. If you are curious about this option, you may be asking yourself, “how long does it take to file for Chapter 7 bankruptcy?”
Generally, most Chapter 7 bankruptcy cases involve a time investment of roughly four-to-six months to complete, once the initial paperwork is filed with the court. However, a bankruptcy court can enter an order erasing many of your debts within 90 days from the date your case was filed. Furthermore, if your case involves no significant assets, there is a chance it could be reviewed and closed within a few weeks after the Court enters a discharge date.
Eligibility to File for Chapter 7 Bankruptcy
Chapter 7 bankruptcy is not a viable option for everyone. If you want to file through Chapter 7, you must pass a specific means test. Basically, the means test is used by the bankruptcy court to confirm that you are eligible for debt relief because your monthly income is insufficient to pay your unsecured debts in a Chapter 13 bankruptcy.
You may be asking yourself, “what exactly is unsecured debt?” Well, it is typically credit card debt, debt from personal loans, and medical debt. It is important to note that not all unsecured debts are eligible to be discharged via Chapter 7 bankruptcy. For example, you cannot discharge any child support or alimony obligations. In addition, if you have a significant amount of student loan debt, this can only be discharged if you meet a specific statutory standard of undue financial hardship. If you own nonexempt property, the Chapter 7 trustee sells it and uses the funds to pay your creditors. Most people’s belongings are fully protected by the state or federal bankruptcy exemptions. Nothing is sold and no money is paid to creditors. That is called a no-asset case.
Timeline for a Chapter 7 Bankruptcy Case
In order to file for Chapter 7 bankruptcy, there are specific steps you have to take, and each step will involve investing time and effort to ensure the process is completed properly. As a result, the exact amount of time to file for Chapter 7 bankruptcy will vary based on your unique circumstances. For example, some people can take weeks or even months to compile the necessary documents and be prepared to file for bankruptcy. To give you an idea of what to expect, here is an overview of the common pre-filing steps involved with filing for Chapter 7 bankruptcy:
- Compile tax and financial records – you will need to track down and compile several different documents to file for bankruptcy. For example, you will need to collect past tax returns and pay stubs so they can be submitted to the bankruptcy court.
- Register and attend a credit counseling court – Individuals who file for Chapter 7 bankruptcy are required to attend a credit counseling course that must be completed in the 180 days before your bankruptcy petition is filed with the court.
- Fill out the required Chapter 7 bankruptcy legal forms – There are specific legal forms that must be filled out and filed with the bankruptcy court. Having a skilled and experienced bankruptcy attorney can pay dividends at this stage of the process since your attorney can take some of the burdens off your shoulders by helping fill out the complex forms.
- File the forms and requisite paperwork with the bankruptcy court – When you, or your bankruptcy attorney, officially submits the necessary bankruptcy forms to the court, several actions are triggered. For example, once you have officially filed, an automatic stay is triggered which prohibits creditors from trying to collect a debt from you. The automatic stay also halts any attempts to garnish your wages.
After your bankruptcy forms are officially filed, the court will proceed with notifying your creditors that all collection activities against you must cease immediately (the aforementioned stay). Once the stay is issued, the court will proceed with scheduling a date for a “341 meeting.” This is a legal term that basically means “creditor meeting.” You should be prepared to attend this meeting. In most bankruptcy cases, the 341 Meeting will take place within 40 days after you file for Chapter 7 bankruptcy.
During the 341 Meeting, you will be required to testify under oath. A bankruptcy trustee will ask you a series of routine questions and your creditors will be afforded time to ask you questions. However, it is important to note that, in most Chapter 7 cases, your time with the trustee will be less than ten minutes. Once the meeting concludes, your creditors will be afforded 30 days to file any formal objections to either the discharge of a specific debt or your case generally.
When to Expect the Formal Discharge of Your Debts to Be Completed
Assuming everything goes smoothly with the 341 Meeting, you can expect the Court to enter a bankruptcy discharge (i.e. the official order that will effectively relieve you of your debts) within 60 days following the conclusion of your 341 Meeting. Though, it is important to note that your bankruptcy case will not be officially resolved unless and until the Court addresses all outstanding matters and issues a “final decree.” Once the final decree is entered, your case will be dismissed.
Issues That Could Delay the Resolution of Your Chapter 7 Bankruptcy
Despite many Chapter 7 cases getting resolved in a matter of months, there are instances where the process does not go smoothly and may lead to a significant delay in the proceedings. For example, if you fail to provide the necessary tax and financial documentation, it could wind up delaying the discharge and closure of your case. Fortunately, in this circumstance, the delay is typically brief since most individuals can correct paperwork issues relatively quickly.
However, if an issue arises with a specific piece of property (e.g., a vehicle, a rental property, etc.), your bankruptcy case could be kept open for quite some time while the property issue is worked out. The length of this type of delay depends primarily on the complexity of the issue.
Finally, if there is an issue related to whether you are eligible to receive a discharge, you could be looking at a lengthy legal battle since this issue may need to be resolved via a bankruptcy lawsuit. If the matter escalates to litigation, both your discharge and the closure of your bankruptcy case could be delayed anywhere between six months and one year.
Interested in Filing for Chapter 7 Bankruptcy? Begin Your Journey to Financial Freedom Today
As you can see, filing for Chapter 7 bankruptcy is a multi-step process that can get complicated and overwhelming very quickly if you are not prepared. Because of the complex nature of the filings, it makes sense to retain the services of a skilled and experienced bankruptcy attorney. They can help guide you through this difficult process and ensure the necessary financial records and legal forms are completed and filed correctly. If you are drowning in debt and want to know your options, take action now. Fill out our free evaluation form to be connected with a local bankruptcy attorney that can help review your case and get you on your first steps towards financial freedom.