How Long Does the Bankruptcy Process Take? What IS the Bankruptcy Process?

I have tended to write about somewhat more substantive matters on this blog, so far, but the #1 question that potential clients ask me when they call actually is, “How long does bankruptcy take?” What they are often curious about, in general, is what exactly the bankruptcy process entails, how often they themselves will have to go to court, and, in addition, how long all of it will, in the end, take. The answers to these questions are quite different for Chapter 7 and Chapter 13 bankruptcies, so I will describe only the Chapter 7 process in this post.

A Chapter 7 bankruptcy, in general, takes about 4 months from the filing of the petition to the receipt of the discharge. That is the official process, however, and does not take into consideration the amount of time the collection of the necessary information and documentation by the filing debtor and his or her attorney requires up front. That up-front time aside, which can take anywhere from a handful of days to a few weeks, depending upon the level of organization and the assets and liabilities in question of each client. The “official process,” however, begins when the debtor’s attorney has utilized all of that collected documentation to draft the bankruptcy petition. When that petition is filed with the court, it sets into place the Automatic Stay against creditors’ collection attempts. This means that, beginning in the exact moment of the petition’s filing, creditors may no longer call with harassing collection phone-calls, send invoices or other mailings, pursue or collect garnishments, or repossess or foreclose on property. This Automatic Stay remains in place for the entire length of the bankruptcy proceeding.

After the petition is filed, what is usually the one-and-only “court date” for a Chapter 7 debtor is scheduled. This is the “341 Meeting of Creditors,” named after the section of the Bankruptcy Code (Sec. 341) which allows for the meeting. This meeting, which is held, generally, at the Federal Bankruptcy Court in your district (in my own Eastern District of Michigan, Southern Division, it is held on the 3rd floor of the Bankruptcy Court at 211 W. Fort St. in downtown Detroit), is generally very short. Typically, the filing debtor simply meets briefly with the Bankruptcy Trustee overseeing the case and not with a judge at all. The Trustee will ask the debtor to verify his or her identity by producing a Social Security Card and Driver’s License and will then ask the debtor any questions he or she has about the petition. The 341 Meeting is generally an opportunity for creditors to make an appearance on the record and ask questions regarding the debt. For most Chapter 7 debtors, creditors generally do not appear, though it does happen. Once this meeting is concluded, there is a mandatory 60-day waiting period before the discharge is granted. This is, again, an opportunity for creditors to challenge the discharge. Provided that none do, the discharge is granted at the end of the 60 days. If the discharge is granted, all of the petitioners’ debts are discharged and need, then, not be paid. If, for any reason, a discharge is not granted, it is after this 60-day period that the Automatic Stay is lifted and creditors may again renew collection efforts.

Any challenge of any sort at any point along this timeline can complicate it significantly, but, by and large, this is the timeline that most Chapter 7 debtors can expect, particularly those who do not own real estate or other secured property more likely to be pursued by creditors than other personal possessions are.

If you are considering filing for bankruptcy and have questions about the process involved or what steps you need to take to begin that process, please contact me at jhilla@aronofflinnell.com or (248) 977-4182 to schedule a free, initial consultation.