Chronology of a Chapter 7 Case

1.    Immediately upon the filing of an individual's first bankruptcy case 11 U.S.C. §362 takes effect to prohibit certain collection activity and other actions against you and your property and in some instances of co-debtors.  A creditor who persists in attempting to collect a debt or taking other action in violation of the bankruptcy code may be penalized.  Pursuant to Bankruptcy Code §521 and Bankruptcy Rule 1007 you must file a list of creditors, a schedule of assets and liabilities, a schedule of current income and current expenditures, and a statement of your financial affairs.  Since October 17, 2005 you are also required to file a statement of current monthly income and must file a copy of your last two years income tax returns and "payment advices" - pay stubs - for the sixty (60) days immediately preceding the filing of the case.

2.    The court immediately appoints a trustee.  The court also schedules what is called a §341 meeting (sometimes called a "creditor meeting").  Pursuant to Bankruptcy Code §341 and Bankruptcy Rule 2003 this meeting must happen no less than 20 days or more than 50 days after the case is filed and according to Bankruptcy Rule 2002 the clerk must give all concerned parties at least 20 days notice of the meeting by mail.  The Bankruptcy Code requires that you complete a financial management course after the case is filed and before a discharge is granted in order to receive a discharge in a bankruptcy case.  You will likely spend 5-10 minutes in your §341 meeting with a the Chapter 7 Trustee.

The Chapter 7 trustee reviews your paperwork to verify that your budget shows that you cannot reasonably be expected to pay back a significant amount of your debt, to determine if you own property that is not protected to you that the trustee should take charge of and sell for the benefit of creditors, and reviews the "Means Test" data to verify that you are eligible for Chapter 7 under the criteria established by Congress in 2005.  If the Trustee (or the US Trustee - the United States government department that supervises trustees) determines for some reason that you are not in fact eligible for Chapter 7 the US Trustee will file a motion to dismiss the case.  The Bankruptcy Judge will likely be asked to resolve the issue.  You can convert to Chapter 13 if you so choose.

    The date the case is filed and the date of the §341 meeting determine the dates for certain other deadlines under several other Bankruptcy Code sections.  The §341 meeting notice notifies all parties of these dates.

    a.    Deadlines for filing Proofs of  Claim.  Usually a Chapter 7 case is a "no asset" case in that all of your property is protected to you from your creditors by either State of Texas property laws or by the Bankruptcy Code property exemptions.  If the case is designated a "no asset case" creditors are instructed not to file claims.  If the case, however, is designated an "asset case" - because there is some property that is not protected to you - creditors will be advised to file proofs of claims.  Pursuant to Bankruptcy Code §502 and Bankruptcy Rule 3002 a creditor other than a governmental entity must file a proof of claim within 90 days after the first date set for the §341 meeting.  A  governmental creditor may filed a claim any time during the 180 days after the case is filed.  A proof of claim is a sworn statement setting forth the amount, type and details of the creditor's claim against you.  The "proof of claim" is submitted on Official Form No. 10 which is mailed by the clerk along with the §341 meeting notice, instructions for completing Official Form No. 10 and a list of parties to which notice has been sent.

    b.    Deadline for Objecting to Claimed Exemptions.  Bankruptcy Code §522 sets out a list of property that is protected to you under the Bankruptcy Code and Bankruptcy Rule No. 4003 requires any party to object to your claim of exemption to property within 30 days following the conclusion of the §341 meeting.  Texas is one of several states that has given its citizens the option to choose either the Bankruptcy Code list of protected property or to use the State of Texas statutes for protecting property from creditors and the deadline for objecting to claimed exemptions applies to whichever statutes are used to claim exemptions.

3.    Your Chapter 7 case can be expected to last 4 to 6 months.  Once the Chapter 7 Trustee makes a report to the Court recommending a discharge be granted and your financial management course has been completed you are eligible for your "Discharge".  The "discharge" cancels any remaining unpaid debt and provides an injunction against those creditors to prevent them from trying to collect those debts.  You should keep documentation of all payments made to your mortgage company, and payments to other secured creditors.  Upon completion of your plan you should obtain copies of your credit reports and review them with your attorney to be sure they are correctly reported.  You should also obtain an itemized payoff statement from your mortgage company to be sure that they have not added unauthorized charges to your mortgage. 

(see also:  What is chapter 7? Reasons to file chapter 13 rather than chapter 7)