What Happens After You File Bankruptcy?

If you have considered filing bankruptcy, hopefully you have researched the options available in your state. Generally, individuals will file Chapter 7 bankruptcy if little to no property is involved and the means test has been passed. Chapter 13 bankruptcy is for those who have disposable income and can make reduced payments to creditors over a period of three or five years. Before making a decision you should be informed as to what happens after you file bankruptcy.

Probably the most important thing to bring up regarding what happens after you file bankruptcy is the collection calls and harassment from your creditors will cease. They are prohibited by law to contact you once you have initiated bankruptcy proceedings. This is called an automatic stay and is a court order by which your creditors must abide. In addition to ceasing all contact regarding your debt, none of your property can be repossessed. The IRS cannot contact you for collection purposes once you have filed bankruptcy. You cannot be evicted, nor can your mortgage company initiate or continue foreclosure proceedings. Wage garnishments are suspended. With the exception of child support or alimony, all lawsuits will come to a screeching halt, so long as no fraudulent activity is involved.

It is important to note in what happens after you file bankruptcy that criminal proceedings are exempt from the automatic stay. So are any creditors or lien holders by which a cosigner has guaranteed payments.

Now that you have a little less stress as afforded through the automatic stay, next in what happens after you file bankruptcy is meeting with your creditors. This occurs approximately one month after initially filing. The meeting will be attended by you and the court appointed trustee. Your creditors may or many not attend. Historically, if creditors send a representative to the meeting it is to contest the exemptions you are claiming.

In this meeting, the trustee will examine the paperwork you have presented outlining your detailed debt and will have you clarify any discrepancies. At this point the trustee will take possession of non-exempt property for the purpose of liquidation in a Chapter 7 bankruptcy, the proceeds of which go towards paying off debt. The entire process, from first filing to receiving discharge of your debts, takes approximately four to six months.