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What happens after you file for chapter 7 bankruptcy?

On Behalf of | Feb 10, 2021 | Chapter 7 Bankruptcy |

Separating truth from fiction regarding bankruptcy can be a daunting prospect, and fear of the unknown stops many Tennessee residents from filing Chapter 7. Understanding what happens after you complete the process can help you decide whether it’s the right option for you.

According to the United States Courts, Chapter 7 of the Bankruptcy Code involves the liquidation of assets. A court trustee takes care of negotiating with creditors, selling only non-exempt assets and ensuring the discharge of certain debts.

Creditors stop calling

You receive a case number, the court assigns a trustee to your case and an automatic stay begins immediately upon filing bankruptcy. The stay prohibits creditors from taking collection action against you. This means they cannot call or make other attempts to collect on debts, including auto repossession.

At the 341 meeting with the trustee, you will answer questions about the bankruptcy filing. Next, the trustee closes all credit card accounts and negotiates with your debt holders. As part of the process, you must cooperate by providing copies of tax returns and other documentation. You keep the exempt property, and the trustee liquidates the rest, paying off your debt. Chapter 7 can discharge most, but not all, debt.

Credit rebuilding begins

Chapter 7 bankruptcy offers a fresh start in about six months. Although you must complete a credit counseling course before filing, there is a second course required afterward, as well. It covers personal finance management and shows you how to take advantage of your fresh start best. You can begin cleaning up your credit report and potentially open a credit card or similar account to start rebuilding your credit.