Chapter 7 bankruptcy is the most common type of bankruptcy. It is for people who simply cannot repay their debt even under the best of circumstances. In most cases, people filing for Chapter 7 bankruptcy do not have to repay any of their debt and are able to keep their vehicles and home.

Chapter 7 bankruptcy is the best option for people who have suffered long-term unemployment or other loss of income, have unmanageable credit card or pay day loan debt and for families who owe thousands of dollars of medical debt.

The Federal, State and Local governments forced extreme restrictions and shutdowns during the Covid-19 pandemic that left thousands unable to cope with the loss of income and mounting medical debt.

When you file for Chapter 7 bankruptcy, the court places an automatic temporary stay on your current debts. This stops creditors from collecting payments, garnishing your wages, foreclosing on your home, repossessing property, evicting you or turning off your utilities.

 

WHAT HAPPENS AFTER YOU FILE FOR BANKRUPTCY?

 

Immediately after you file bankruptcy, federal law imposes an “automatic stay” to stop your creditors from collecting on your existing debt, including garnishments that are currently in place. In some cases, you can even recover money recently taken through garnishment. Filing also temporarily stops a home foreclosure proceeding. A bankruptcy Trustee will be placed in charge of your case.

Upon filing, the Bankruptcy Court will mail your creditors a notice of the bankruptcy filing. Once they have been given notice, they must stop collection efforts or be liable for court sanctions. In the interim, you can provide the creditors with the bankruptcy case number as well as Texas bankruptcy lawyer Patty Edwards’ information.

The vast majority of people no longer hear from unsecured creditors once their bankruptcy petition is filed. You will not be required to make payments on any unsecured debt while your bankruptcy is pending. However, if you plan to keep your vehicle and home, you should continue to pay these secured debts. Always continue to pay your day-to-day living expenses, such as rent, groceries and utilities.

About 30 to 40 days after filing the bankruptcy petition, you will be required to attend a “Meeting of Creditors” or “Section 341(a) Examination.” There is no judge at this hearing, only the bankruptcy trustee in charge of your case. This is the Creditors’ only chance to ask you questions about the debt owed to them; they are not allowed to berate or harass you. They very rarely show up for the hearing. Most hearings last about four minutes with the trustee asking you a few questions. (Here is a list of the questions most commonly asked at the Meeting of Creditors.)

 

BANKRUPTCY IS NOT THE END OF THE WORLD

 

In a 1934 U.S. Supreme Court decision, the Court revealed that the primary goal of bankruptcy laws was to offer debtors a “fresh start” from financial burdens. In Local Loan v. Hunt, the Supreme Court asserts, “[I]t gives to the honest but unfortunate debtor…a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt.”

 

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