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Chapter 7 the most frequently filed type of bankruptcy. It is also sometimes called “liquidation bankruptcy” because it will liquidate most, or all, of your debt. Your nonexempt property will be sold by the bankruptcy trustee in order to pay the proceeds, if any, to the creditors. You will be able to keep your exempt property. To begin Chapter 7 bankruptcy, you have to get a long list of forms from the bankruptcy court and fill them out. After you have filed the forms with the bankruptcy court, the automatic stay kicks in.

The automatic stay

The automatic stay precludes your creditors, secured and unsecured, from trying to collect what you owe them. It’s called “automatic” stay because court issues this injunction on its own initiative without you even asking for it. This is to give you some peace of mind and to ensure that the bankruptcy trustee, and not your creditors, will decide what you get to keep. Even non-dischargeable loans are subject to the automatic stay.

Mandatory credit counseling

Within the 180-day period prior to filing, you must receive mandatory credit counseling form an approved nonprofit agency and file a certificate of completion with the bankruptcy court. Credit counseling will last about an hour, the agent will go over your budget with you and give you suggestions and possible alternatives to bankruptcy. You don’t have to follow the advice given by the agency but you do have to obtain the certificate of completion. If the agency does come up with an alternative plan for you, you have to file it with the rest of your paperwork. You don’t have to participate in counseling if your disability prevents you from doing so.

The Meeting of creditors (“341 meeting”)

After you’ve filed all the required paperwork with the bankruptcy court, the court will send out a notice to all of your creditors in order to give them an opportunity to file objections and attend a scheduled hearing. This notice is called “341 notice,” which is a reference to Section 341 of the bankruptcy code. At the meeting, the bankruptcy trustee will ask you a few questions about your paperwork. For example, how you came up with your property value figures, whether this is your first time filing for bankruptcy and whether all the information in your papers is true and accurate. The meeting typically lasts a few minutes. Creditors rarely attend the meeting of creditors.

The Discharge

Approximately two months after the meeting of creditors, you will receive a Notice of Discharge from the bankruptcy court. You will then be free to move on with your life. If you receive proceeds from divorce, insurance or inheritance within 180 days of your filing date, you must report to the bankruptcy court. Failure to do so may result in bankruptcy court revoking your bankruptcy discharge.

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