How long does bankruptcy take? That’s a common question asked by people considering bankruptcy. The answer depends on whether someone files Chapter 7 or Chapter 13. One takes a few months, the other takes up to five years. Both start out the same and follow the same timeline up through the Meeting of Creditors. That’s where the paths diverge
Consultation to Filing
The time from the first meeting with an attorney to the filing of the bankruptcy petition can be as short as a week or it can be several months. That’s because the attorney can’t do anything until the client completes the packet of forms the attorney will give her at the initial consultation. These forms provide the attorney with what he needs to complete the petition, Schedules A-J, the Statement of Financial Affairs, the Statement of Current Monthly Income (Means Test) and all the other documents that must be prepared and filed as part of the bankruptcy. How quickly the client completes these forms is up to her. The client should remember, though, that accuracy is more important than speed. Some people just want to get their case filed as quickly as possible, and often they won’t do a thorough job of collecting information on their creditors or listing all their property. If that happens, the errors can be corrected through amendments, but adding creditors incurs additional filing fees and most attorneys will charge extra for preparing amendments. If creditors are overlooked completely, the bankruptcy might not be effective against them. It’s best to be careful and complete the first time.
Once the information is returned to the attorney, it’s a matter of a few days for the law firm to input the data and generate a first draft of the schedules and other documents. This draft is sent to the client for her review. The attorney will probably have questions as he prepares the documents, so he will need answers from the client as well. Once the attorney is satisfied that all the necessary information is in the schedules and is correct, he’ll schedule a meeting to sign everything. He’ll go over each schedule, page by page, and the client will sign her name several times. After signing, the attorney will file everything with the bankruptcy court.
Filing to Meeting of Creditors
Once the filing is made, the Bankruptcy Court generates notices to be sent to all creditors. This notice tells the creditors and the debtor that there will be a Meeting of Creditors. The Meeting of Creditors is held between 20 and 40 days after the debtor files her case.
During this time between filing and the Meeting of Creditors, there is still much to do. In both Chapter 7 and 13, the debtor must provide the bankruptcy trustee with additional information, such as pay stubs for the 60 days prior to filing; income tax returns for the prior year; property tax notices for real property the debtor owns; bank statements for the month during which the debtor filed bankruptcy, and other financial account information; and a Domestic Support Obligation (DSO) questionnaire. If the debtor is in Chapter 13 and did not file her plan as part of the initial filing, the plan must be filed within 14 days of the initial filing. Also, in Chapter 13, the debtor must make her first plan payment prior to the Meeting of Creditors.
After the Meeting of Creditors
This is where Chapter 7 and Chapter 13 diverge.
Chapter 7. At the Meeting of Creditors, the Chapter 7 trustee might ask the debtor for additional information. If so, the debtor must provide that information. If the debtor is entitled to an income tax refund for the prior year, the trustee will tell the debtor that the refund belongs to him as trustee and direct the debtor to turn it over as soon as she receives it. Additionally, the trustee might direct the debtor to send the trustee a copy of the debtor’s tax return for the current year when the debtor files the following year. The debtor is required to comply with all the trustee’s directives. There is a 60-day period following the Meeting of Creditors in which any party can object to the debtor’s discharge. The grounds for objecting are narrow and 95% or more of Chapter 7 cases have no objections raised. Once the 60-day period has passed, if there are no objections, the debtor will receive her discharge. If there are no assets for the trustee to administer, the trustee will close the case shortly thereafter.
Chapter 13. The Chapter 13 trustee might also have some requests for information from the debtor, which the debtor is also required to provide. There is a 60-day period in which creditors may object to discharge in Chapter 13, just like in Chapter 7. Again, it is rare that a creditor objects to discharge
The conclusion of the Meeting of Creditors in Chapter 13 is just the beginning of the case, unlike in Chapter 7 where the Meeting of Creditors is often the last thing to happen apart from waiting for the discharge. Creditors have a deadline for filing claims in Chapter 13. Only creditors who file claims and who have their claims allowed by the Bankruptcy Court are entitled to share in distributions from the Chapter 13 trustee. Once the deadline for filing claims has passed, the debtor, through her attorney, may object to any claims, either as to the entire claim or as to the amount. Claim objections are resolved by the bankruptcy judge, often at a hearing where the debtor and creditor present evidence.
Creditors may object to confirmation of the debtor’s plan. This often happens with secured claims, such as vehicle loans, where the creditor disagrees with the value the debtor has placed on the vehicle, or how the debtor proposes to treat the creditor’s claim. Often the Chapter 13 trustee has objections, usually because the plan will not provide the required return to creditors or otherwise does not comply with the provisions of the Bankruptcy Code. All objections to confirmation must be resolved or the plan cannot be confirmed.
The bankruptcy notice in Chapter 13 will have a date for a confirmation hearing, which is a hearing before the bankruptcy judge to determine whether the debtor’s plan meets the requirements of the Bankruptcy Code. If there are outstanding objections, the confirmation hearing will often be continued until those objections are resolved. If they cannot be resolved, the court will hold a contested confirmation hearing at which the debtor and the objecting parties present their arguments for and against the plan. The judge will decide whether the case will be confirmed.
The first date for the confirmation hearing set in the notice of bankruptcy is set about 65-70 days after filing. It’s not uncommon for this to be continued one or two times to resolve objections. Confirmation usually occurs within 120-150 days after filing the case, though if there are a number of claims objections that must be resolved, the time can be longer.
Confirmation to Discharge
After confirmation of the plan, the debtor makes payments for the remainder of her plan’s term, which is from 36-60 months, unless the debtor is able to pay all her debts in a shorter time. If there are no changes to the debtor’s circumstances that required modifications to the plan, all she must do is make the monthly payments. Upon completing her plan payments, the debtor will receive a discharge.
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