By Columbia – Lexington Bankruptcy Attorney Lex Rogerson
A typical chapter 7 bankruptcy case lasts three months and requires one appearance — plus a lot of information.
Before we file a chapter 7 bankruptcy case for anyone, I sit down with the client and explain the procedure for such a case in the District of South Carolina . This article takes you into that conference, which is designed to let our client know what to expect from that point until the case is completed.
Once you have decided to file, the first task is to put together a substantial stack of documents that must be filed at the beginning of the case. If you have dealt with a lawyer on any other legal matter, you may find it surprising that most of the legal work usually takes place before we file the first document.
The Bankruptcy Code requires the debtor to file a substantial amount of paper work at the beginning:
- a petition, which is a simple 3-page form that gives identifying information about the debtor and the debtor’s lawyer;
- a set of schedules that disclose all the debtor’s assets and debts;
- additional schedules showing the debtor’s income and expenses;
- a statement of financial affairs, which is a questionnaire about the debtor’s recent financial history;
- a means test form, designed to screen out people who can afford to pay their debts;
- if the debtor is employed, pay stubs for the last 60 days
- a certificate showing completion of the required credit counseling session; and
- a few other disclosures required of the debtor’s attorney.
Every law office has different ways of collecting the information to complete these documents. In our office, we have prepared a packet of information for our clients to complete and return to us. Then my assistant works closely with the client for the next few days to clarify the information, fill in the gaps, and enter it all into special software that assembles the documents. I review the schedules and statements thoroughly, usually the day before filing.
Step 2 — filing
Once the required documents are complete, the client comes to our office to review them and sign. Because filing in bankruptcy court is electronic, we almost always file the case that same day.
Filing date is significant for at least three reasons:
- You can only discharge debts you owe at that point. So if you incur any financial obligation after filing, it will not be covered by your case.
- Likewise, when the trustee reviews your property to see if you own anything he can seize and sell off, he usually only reach the assets you own on filing day. So if you acquire anything after that date, it is not at risk. But there are three exceptions: if, in the six months after filing, you inherit anything, or become entitled to life insurance proceeds from someone who has died, or acquire any money or property in a divorce or legal separation, that property comes into the bankruptcy “estate,” meaning your trustee may be able to reach it if you do not have sufficient exemptions to protect it.
- You get certain protections from your creditors. Filing imposes an automatic stay that prevents creditors from doing most of the usual collection activity, including phone calls, past due letters, lawsuits, repossessions, and foreclosures. Any such activity that has started before filing day must stop.
In Part 2 of this series, we’ll discuss the conclusion of a chapter 7 bankruptcy case, including the meeting of creditors and the discharge.