What Happens After Filing for Bankruptcy?

By Daisy Rogozinsky
/
June 28, 2022

In many ways, filing for bankruptcy offers tremendous relief to people who are struggling with overwhelming debt and aggressive debt collectors. However, it can also be a daunting endeavor involving large quantities of paperwork, government officials, and complicated jargon. And it’s only more challenging if you don’t know what to expect will happen. But knowledge is power, and the better you understand the bankruptcy process, the more comfortable you will feel throughout it. In this article, we’ll share what you can expect will occur after you file for bankruptcy.

1. You Will Be Assigned a Bankruptcy Trustee

If you file for Chapter 7 or Chapter 13 bankruptcy, you will have a trustee assigned to your case. He or she will be in charge of administering your filing, verifying your information, and representing your creditors’ interests. You will interact with your trustee several times throughout the time your case is active. 

2. You Will Attend a 341 Meeting of Creditors

Toward the beginning of the bankruptcy process, your trustee will oversee a 341 meeting of creditors in which you will have to give information about your debts and assets under oath. Creditors may attend this meeting if they choose, but they rarely do. While it may sound intimidating, the goal of the 341 meeting is mostly just to verify the information you included in your bankruptcy paperwork. 

3. Debt Collectors Will Stop Their Efforts

Filing for bankruptcy triggers an automatic stay, which requires creditors to stop their efforts to collect the money you owe them. This will stop wage garnishment and prevent further collector calls and letters. 

4. You Will Take Financial Management Courses

All debtors filing for bankruptcy are required to take credit counseling courses before filing for bankruptcy and financial management courses after filing. These will help you better manage your finances after the bankruptcy process is over. Once you’ve completed these courses, your debt will be discharged. 

5. Your Property Will Be Sold Off…

If you filed for Chapter 7 bankruptcy, your non-exempt assets will be put into your bankruptcy estate. Your bankruptcy trustee will liquidate your properties and distribute the money to your creditors according to bankruptcy law-dictated priority. However, not all of your properties get sold off. Any exempt assets such as household items, clothing, and some equity in your home - necessities of daily living - will not be sold. 

…. Or You Will Begin a Repayment Plan

If you filed for Chapter 13 bankruptcy, you will follow your repayment plan and begin to pay off what you can of your debts in the specified time. However, you will have to pay non-dischargeable debts such as domestic support obligations and criminal penalties in full. 

6. Your Eligible Debts Will Be Discharged

Next, your eligible debts will be discharged. These include things like:

  • Credit card balances
  • Medical bills
  • Overdue rent payments
  • Payday loans
  • Overdue cellphone bills
  • Overdue utility bills

While your secured debts such as a mortgage or car payments can be discharged, your creditors’ lien will remain valid. This means that they maintain the right to foreclose or repossess your property. To avoid this, you have the option to negotiate with your creditor to make payments toward your loans. 

7. Your Credit Score Will Be Affected

One of the most serious consequences of filing for bankruptcy is the impact on your credit score. Bankruptcy lowers your credit score, remaining on your credit report and in the public record for 10 years for Chapter 7 and seven years for Chapter 13. Additionally, you will most likely see your insurance premiums go up.

Because of your poor credit, it will most likely be rather difficult to get a new car loan or mortgage after finalizing your bankruptcy case. Your interest rates will also be higher when you do. However, to rebuild your credit, you can take steps such as:

  • Not taking on debt that you won’t be able to repay
  • Staying current on all of your bills
  • Getting a new credit card

8. You Will Have to Wait If You Want to File Again

If you get back into financial trouble and want to file for bankruptcy again, you will have to wait a certain length of time in order to do so. 

The exact time requirements are as follows: 

  • Eight years between Chapter 7 and Chapter 7
  • Four years between Chapter 6 and Chapter 13
  • Two years between Chapter 13 and Chapter 13
  • Six years between Chapter 13 and Chapter 13

Conclusion

Bankruptcy is a fairly complex legal process that has both advantages and disadvantages for the bankrupt debtor. One step you can take to make the process feel much smoother and less overwhelming is to familiarize yourself ahead of time with what the bankruptcy process looks like. Additionally, working with an experienced bankruptcy lawyer can help you understand and navigate bankruptcy as well as avoid making any kind of mistakes along the way that might complicate things.

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