Almost 800,000 people and businesses filed for bankruptcy protection in 2016.
Most of those people will tell you that they felt alone, depressed, and desperate before they filed. And a sense of comfort and relief after the process ended.
Filing for bankruptcy can be a difficult decision. But living with the overwhelming burden of debt is certainly no way to live, and bankruptcy is very often the best option.
In this article, let’s take a closer look at the personal bankruptcy timeline. We’ll go over how long it takes to file, what happens after, and when you’ll be debt-free.
The Personal Bankruptcy Timeline
First, it’s best to hire a good attorney to help you navigate this process. It gives you peace of mind and makes the process easier. Even if you don’t think you can afford an attorney, call a knowledgeable bankruptcy attorney, you might be surprised.
Now, let’s take a closer look at the bankruptcy timeline.
Meet with your attorney to discuss the necessary paperwork. It usually takes people a few days to a few weeks to get everything in order. You’ll need banking account information, retirement account statements, pay stubs, and tax returns.
Then your attorney helps you prepare the bankruptcy petition. This document is usually between 50 and 70 pages when complete. It includes everything the judge and bankruptcy trustee need to for your filing.
Before you file, you must complete a credit counseling course. This must take place 180 days or less before you file. And it must be done through an approved course provider before you can file.
Filing: Day 0
File the petition with the court. This is something your attorney handles. The Court filing fee must be paid upon filing or arrangements made to pay it in installments.
The day you file is the day your case begins. This is also the day that the automatic stay goes into effect. A stay prevents creditors from hassling you about debts or taking any further collection action.
The court sends out letters to your creditors a few days after you file. However, most creditors get electronic notice of your filing so they can stop hassling you immediately. This keeps you safe from further harassment and possible wage garnishment.
The court gives you 14 days from the filing date to take care of any missing information in your petition, if any.
A meeting is scheduled no more than 40 days after the filing. This meeting is between you and the bankruptcy trustee. And may include creditors who wish to ask questions (a rare situation).
The trustee will ask you some very straightforward questions and the whole thing takes place in a big conference room, not a courtroom and not before a judge. This keeps the meeting somewhat informal, certainly less formal than appearing before a judge.
Once you have a bankruptcy case number, you are eligible to take a financial management class. You must complete this within 45 days of your bankruptcy meeting or your case is dismissed with no discharge of debt.
Creditors may object to the bankruptcy up to 60 days after the trustee meeting. If no creditors object, most bankruptcy cases are discharged by day 130. This is about 4.5 months after the filing date.
Life After Discharge
After the discharge, your debts essentially “go away.” The Court sends you the order to discharge and closes your bankruptcy case. This officially ends your case (in your favor).
Many people are surprised their credit score is often higher after a bankruptcy discharge than it was before filing. This is because you no longer have any debt. Debt is a huge factor in determining your credit score, and your debt just went to $0.
Tpically, each credit account that was discharged in bankruptcy should reflect a zero balance, although it may notate that the debt was discharged.
As the bankruptcy filing gets older and older it has less of an effect on your credit score, in fact many clients have a credit score over 700 just one year after bankruptcy.
Filing for Bankruptcy Can Get You Your Life Back
If you’re considering filing for bankruptcy, talk to a bankruptcy attorney. The bankruptcy process is complicated and probably not something you want to take on yourself. You don’t want paperwork mistakes to cost you a successful discharge.
At McFarlin LLP, we have successfully represented thousands of consumers and busineses in bankruptcy.