As soon as you make the difficult decision to file a bankruptcy, your focus should be on getting to the discharge, to getting this chapter of your life behind you.
What Exactly Is the Discharge? A discharge is an Order from the Bankruptcy Court governing your case that legally declares your debts can not be collected from you, ever again. Also, you cannot be taxed on the “forgiveness of debt”. There are a few exceptions to discharge. The most common ones are student loans, child support and other domestic support obligations, as well as tax debts. If you have any questions about what is discharged in your case, please contact me. I’m more than happy to explain it.
I’ve Filed Already, What Do I Have to Do to be Sure I Get my Discharge? Once you file, most of the work is finished, but there are a few requirements you have to meet between filing and discharge.
- Attend your Meeting of Creditors and bring any documents requested. These are most often bank statements from the date of filinf, recent paystubs and recently filed tax returns. I should already have everything else, right?
- Complete your Debt Management Course through an approved credit counselor no later than 45 days after your Meeting of Creditors.
- Finally, you have an ongoing duty to cooperate and comply with requests of the Trustee, U.S. Trustee or other agent of the Bankruptcy Court. I try to be sure I get enough information from you to answer questions before they have to be asked, but sometimes more information may be needed. I’ll let you know if it is.
What About Reaffirming Debts? If you want to keep paying on a debt, you will need to sign a Reaffirmation Agreement. The judges will typically not allow them except in the case of homes or cars that you need and can afford. Yes, they do feel it is their responsibility to protect you from yourself sometimes.
Reaffirming legally re-obligates you on a debt as if you never listed it in the bankruptcy. It is always voluntary for both parties. You don’t have to sign one, but the creditors don’t have to renegotiate terms (and usually don’t). When you file, we’ll request any you want to sign and send them to you for signatures before they can be filed.
What About Property I Don’t Reaffirm? Bankruptcy discharges debts. Under most circumstances, bankruptcy doesn’t get rid of liens. If I think you have a lien that can be avoided, either a judgment lien on a home or some finance company liens on household goods, I’ll let you know and handle filing the Motion to do so.
If you don’t want to reaffirm your home, you can still make payments, but those payments will not go toward rebuilding your credit. With a vehicle, failing to file a reaffirmation agreement is a condition of default and it may get respossessed.
If you choose not to repay a debt with collateral, you always take a risk of losing that property after the discharge comes and the Automatic Stay is lifted. If the collateral is a house, it will eventually be foreclosed. If it is a car, it will probably eventually be repossessed, though you can certainly drive it as long as they don’t pick it up and you keep it insured. With household goods, you’re taking your chances, but most of the time creditors don’t bother collecting.
Timing: Assuming there are no complications in your case, the hearing will be about a month or two after filing and the case must be held open for sixty days to allow creditors, the trustee and the U.S. Trustee to file any objections. These are very rare and I will have told you if I expect any. After that time is up, the discharge will be entered. If there are no assets for the trustee to sell (almost always the case), the case will be closed. So, from filing to closing a Chapter 7 will take three to four months.
Final Thoughts: If you have any questions, please contact my office. My goal is to get you your discharge. The hard part was preparing an accurate petition. Now, you can relax a little, finish up the last few requirements and wait for it all to be over.