How Bankruptcy Works – Bankruptcy.com

Understanding the Bankruptcy Process and Timeline

If you are in financial trouble and are even considering filing for bankruptcy protection, the best thing you can do is to consult with an experienced bankruptcy attorney in your area. Most bankruptcy attorneys will offer a free initial consultation, or at least one for a low cost, and they will be able to fully analyze your situation and provide you with the knowledge and options you need to make the best decision for your circumstances. It is a difficult and often frightening proposition to meet with an attorney and discuss filing for bankruptcy, however the sooner you do so the sooner you will discover that you do have options available that can seriously help you.

Bankruptcy, at its most basic level, is a federal legal process founded in Title 11 of the United States Code that was enacted to allow for individuals and business in serious financial trouble to manage and often eliminate most or all of their debts. Think of it as a financial reset, providing a fresh start to the honest but unfortunate debtor. For individuals, the vast majority of bankruptcy cases are filed under Chapter 7 or Chapter 13 of the Bankruptcy Code. Chapter 7 is a relatively short, 4 – 5 month process that eliminates debts entirely. Chapter 13 is a longer process, usually 3-5 years, wherein an individual pays back as much of their debt as they can afford to, with the balance being eliminated at the end of the case.

The first step is to schedule an appointment with an experienced bankruptcy attorney. Many attorneys will complete this first consultation virtually, either over the phone or through the computer, so you will not even have to go into an office.

To prepare for this appointment, you will want to gather as many of the pertinent documents as possible. These include:

Proof of identity. Your driver’s license or state identification card and your social security card is the norm.
Proof of income for all sources of income in the household.
A list of all of your creditors and the amount you owe them. You do not need to have all of the bills and statements, as usually if you do go forward with a case your attorney will pull a credit report with you, but a simple list is a good starting point.
A list of all of your ordinary monthly household expenses.
Copies of any lawsuits filed against you, including foreclosure documents.
Your last filed tax return. The attorney may ask for the last few.
A recent bank statement from each bank account you have.

If you go forward with a bankruptcy case, your attorney will let you know what additional documents you will need to provide, but these are the standard documents needed for the attorney to perform a complete and accurate analysis of your situation. With this information, they can advise you of their recommended course of action. Keep in mind that an experienced attorney is not always going to recommend an immediate bankruptcy filing. There may be some strategic decisions that have to be made regarding the timing of filing and, to be blunt, bankruptcy is not always the right answer to every financial challenge. A good lawyer will advise you appropriately.

Assuming that filing for bankruptcy is determined to be the best course of action, the process and timeline will be different depending on whether you are filing for Chapter 7 bankruptcy or Chapter 13 bankruptcy, but there are still mostly common elements.

Documents: Your attorney will request a complete list of documents that you will need to provide to them in order to properly complete your bankruptcy petition. Please keep in mind that the attorney is not asking for these documents to create work for you, or because they need more documents in their lives, but rather to ensure that your bankruptcy petition is as complete and accurate as humanly possible. Gather the documents quickly and completely and provide them to your attorney.

Consumer Credit Counseling Course: Before you are eligible to file for either Chapter 7 or Chapter 13 bankruptcy, you must complete a Consumer Credit Counseling Course from an approved provider. This course takes about an hour, is usually done online or over the phone, and once it is completed, a certificate of completion is issued that is filed with your case. The certificate is valid for six months, so there is no reason not to complete the course early. Your attorney will direct you to a provider to complete the course.

Attorneys Fees & Costs: This should not be the most frightening part of the process. Fees and costs that attorneys charged are closely monitored by the court and the U.S. Trustee’s office and must be clearly and fully disclosed to you in writing prior to hiring the attorney. They also must be disclosed in the bankruptcy petition itself so that there is total transparency in the process.

In a Chapter 7 case, most attorneys will charge you a flat fee for their services and accept payments until the fees are paid. Some attorneys will bifurcate the fees, taking some payment prior to the filing, with the rest in installments after the case is filed.

In a Chapter 13 case, most courts have adopted a presumptively reasonable fee. This means that most, if not all, attorneys in the area charge the same fee. Since filing for Chapter 13 is, by definition, entering into a payment plan, most attorneys will put the majority of their fees into the payment plan and file your case relatively quickly.

There is a filing fee for any bankruptcy filed. This is the fee paid to the court to administer the case. Currently the Chapter 7 filing fee is $338 and the Chapter 13 filing fee is $313. Usually the filing fee must be paid at the time of filing, but the Bankruptcy Code does specifically allow for debtors to pay the filing fee in installments when it is deemed necessary. In a Chapter 7 case, the filing fee can be waived in exceptional circumstances.

There are usually some costs associated with the case that you will be required to pay. Many experienced attorneys will want you to pay for a merged, three-bureau credit report. Some will collect the cost of the courses from you prior to filing. Some jurisdictions have also adopted standardized costs for items such as mailing notices. Your attorney will disclose these costs prior to you hiring them as well.

Prior to filing your case, you must be given the opportunity to fully review all of the forms and schedules (and plan of reorganization in a Chapter 13). Upon review, you are required to sign the documents under oath that they are true and correct.

Once this is completed, the case can be filed with the court. Filing is generally done electronically by your attorney using the court’s CM/ECF filing system. This system allows your attorney to file at all hours and provides immediate recognition of your bankruptcy case. The date and exact time of the filing is captured and may be hugely important if you are trying to stop a specific action, such as the sale of your home in a foreclosure proceeding.

Upon filing your bankruptcy case, several events occur in short order.

The Automatic Stay of Bankruptcy takes effect (in most cases, see exceptional circumstances below for where it may not). This is the powerful federal injunction against your creditors that stops most collection activities of your creditors.

You are assigned your bankruptcy case number. This usually starts with the last two digits of the year the case was filed, then cases are numbered sequentially as they are filed. If you filed the first case of 2025 in the jurisdiction, the case number would be 25-00001.

You are assigned to a bankruptcy judge. Depending on where you live, there may only be one bankruptcy judge or there may be multiple, in which event your case will be appointed to a specific judge. In a Chapter 7 case, you and your attorney will have little or no engagement with the bankruptcy judge, as the trustee handles most matters surrounding the case. In a Chapter 13 case, there are many more interactions with the judge that will be discussed shortly.

You are assigned a bankruptcy trustee. This is the person who is responsible for overseeing and administering your case going forward. In Chapter 7 cases, there will be a panel of trustees that are assigned cases in a rotation. In Chapter 13 cases, there will be one or more standing (full-time trustees) that your case will be assigned to.

You will be assigned a date and time for your Section 341 Meeting of Creditors. This meeting will take place no less than twenty-one (21) days after the filing of the case, though usually it is 4-6 weeks after the filing. This is usually the only mandatory appearance that you have in the case, even in Chapter 13 cases. Your attorney will fully prepare you for this meeting but be aware that they are generally conducted remotely and are very quick and straightforward.

At any time after filing and before the case closes, you must complete your Personal Financial Management Course (commonly referred to as Debtor’s Education). Your attorney will direct you when and how to complete this course, usually done either online or over the phone, and it will take roughly an hour. You must complete this course in order to be eligible for a discharge at the end of the case, so it is strongly recommended that you do so soon after filing.

Here is where the process and timeline of consumer bankruptcy cases split. Chapter 7 cases, as discussed, are more streamlined and there is less for you and your attorney to do. Chapter 13 cases, on the other hand, will last for the next three-to-five years and require several more steps.

Chapter 7

In a Chapter 7 bankruptcy, your next step is to attend and complete the 341 Meeting of Creditors. At this meeting, you will be sworn in and prove your identity, then the trustee will ask you a short list of questions to confirm the data that you included in your petition. The meeting generally takes less than ten minutes.

If yours is among the vast majority of cases where there are no assets available to the trustee to liquidate, then the trustee will file a Report of No Distribution and their involvement in the case will substantially terminate. If there is an asset available to liquidate and the trustee elects to do so, then they will issue a Notice of Assets and will stay involved in the case until the asset is sold, the funds are distributed to the creditors and the bankruptcy estate is closed. Even if an asset is available for liquidation, it will usually not hold up your case and your discharge.

After your 341 Meeting of Creditors is concluded, there is a mandatory sixty-day waiting period. This is written into the Bankruptcy Code and cannot be shortened. The purpose of this waiting period is to provide adequate time for your creditors to review your petition and look at their own records to determine whether or not they want to object to your discharge. Objections, which come in the form of mini-lawsuits within the bankruptcy case called adversary proceedings, are very rare. They can, however, be significant, as a creditor could seek to except some or all of the debt owed to them from discharge or they could seek denial of the entire discharge. Have no concerns, if an adversary is filed in your case your attorney will notify you quickly and discuss the risks and your options.

Also after your 341 Meeting of Creditors, you are required to execute on your intentions regarding your secured property. If you stated that you were going to surrender a vehicle in order to discharge the loan, you must do so. If you stated that you were going to keep paying for the car and keep the loan through the bankruptcy, then you must execute a reaffirmation agreement. A reaffirmation is simply a reinstatement of your contractual obligation on the debt. Again, your attorney will receive any reaffirmation agreements and contact you to execute them.

Finally, assuming there are no adversary proceedings seeking to deny your entire discharge, the court is able to close your case. Usually this will occur within two weeks from the end of the sixty-day window for objections. Once the case is closed, assuming you have completed and filed your Personal Financial Management Course Certificate, then the court is free to issue your discharge. This is usually done within days of the closing of the case.

In Chapter 7 cases, receiving the discharge is the purpose of the filing. The discharge is a second, even more powerful injunction that states that the creditors scheduled in your bankruptcy petition are never allowed to attempt to collect the debts from you, in essence eliminating them. If a creditor does attempt to collect from you after the discharge, let your attorney know immediately, as they may be able to bring a legal action against them for violation of the discharge injunction and recover actual and punitive damages for you.

Chapter 13

When your Chapter 13 is filed, not only will you be assigned a case number, judge, trustee and 341 Meeting of Creditors date and time, you will also be assigned a confirmation hearing date and time. This is where your case is presented to the judge to be approved (confirmed). More on this in a moment.

In a Chapter 13 case, usually your first trustee payment is the first real step that you must take after filing. The payment is due thirty (30) days after the date of the filing, while your 341 Meeting of Creditors is very often scheduled for further out than that. You are responsible for making your payments to the trustee, even if you agreed to automatic deductions from your paycheck or your bank account. Many Chapter 13 cases start poorly because the first payment is missed and then you spend the rest of the case trying to catch up.

You must then attend your Section 341 Meeting of Creditors. At this meeting the trustee will verify your identity and swear you in, then proceed to ask you questions about the data in your bankruptcy petition and about the feasibility of your Chapter 13 plan. The meeting usually occurs remotely and lasts for 10-15 minutes. Your attorney will attend with you. The Chapter 13 trustee is responsible for ensuring not only that everything is accurate and correct, but also that you are making a good faith effort to repay as much of your debt as you can afford. To that end, the trustee may ask your attorney to make some changes to your petition and plan, called amendments, prior to your upcoming confirmation hearing.

After the date of filing and before the first scheduled confirmation hearing, you may receive objections from your creditors to your plan. Do not panic, this is commonplace. Creditors are required to file documents in your case stating exactly how much you owe them, called a Proof of Claim. If the amount listed in the plan does not match the Proof of Claim, often due to underestimated mortgage arrears or balances on car loans, the creditor must object until an amendment is filed to ensure that they receive their full amount. Creditors, usually car lenders, will also often object seeking better treatment in the plan, a higher interest rate and/or a higher fixed payment amount. The trustee may also object, or file a motion to dismiss the case, to ensure that the changes that they have requested are made before the case is confirmed. An experienced bankruptcy attorney knows exactly how to handle these objections and make the necessary amendments in order to keep your case moving forward.

The first confirmation hearing is usually scheduled for six to eight weeks after the initial filing date. This is conducted by the judge in the courtroom, though many courts have adopted virtual confirmation hearings, and you as the debtor are usually not required to attend. If your attorney has made the appropriate amendments to resolve the objections and you have made all of your scheduled payments, the judge will approve (confirm) your plan. If the amendments are not filed, or a creditor appears and requests more time to file an objection, or if the payments to the trustee have not been made, then the court will usually continue confirmation for three or four additional weeks. There is no harm in a continued confirmation hearing, but the sooner your case is confirmed, the sooner you have the full protection of the bankruptcy.

Once your case is confirmed, all parties are bound by the confirmation order and can no longer object to your plan. On paper, the rest of the process is quite simple. Make all of your payments for the next three to five years, the case will complete and you will receive your discharge. Life does not always fall in line with that level of simplicity, which is why the Bankruptcy Code remains flexible. If your circumstances change while your case is ongoing, contact your attorney immediately. You have some ability to modify your plan in the event of a disruption in your income or unexpected expense, but this must be done with notice to all parties and with the approval of the court. The sooner your attorney is aware, the sooner they can take the necessary actions. You are also generally not permitted to incur new credit or sell any significant assets while under the protection of the court without court permission.

Assuming that everything proceeds, either perfectly or planned or with multiple modifications, once you reach the end of your plan payments the trustee will file a Notice of Final Plan Payment (or a similarly entitled document) with the court. The court can then go forward with closing the case and issuing your discharge.

Exceptional Circumstances

When Congress changed the Bankruptcy Code in October 2005, enacting the Bankruptcy Abuse Prevention and Consumer Protection Act, they put a couple of qualifiers on the Automatic Stay of Bankruptcy for individuals who have filed a prior case. If you have had a bankruptcy case dismissed within one year of the date of filing of the current case, then the Automatic Stay will only go into effect for the first thirty days of the case. You must file a motion with the court explaining why the new case will work when the last one failed in order to convince the court to extend the Automatic Stay for the life of the case. If you have had two cases dismissed within the last year, then the Automatic Stay will not even take effect when you file the case and you must file a motion with the court seeking to impose the automatic stay, again explaining why this case will work when the last two did not. An experienced bankruptcy attorney files these motions routinely, yet another reason to hire one in these circumstances.

If you have read all the way to here, you recognize that the process of bankruptcy is not as simple as filing a petition for relief and receiving a discharge. There are a lot of detailed steps that must be completed timely and accurately in order to reach the end and be granted final relief. It is often said that a bankruptcy discharge is earned by completing the process. A qualified bankruptcy attorney who handles these cases routinely will be able to help you navigate these steps and allow you to receive the fresh start you are seeking.