As with any legal case, the first step is to meet with the potential debtors.  Once the Chapter 7 bankruptcy attorney has advised the debtors regarding the bankruptcy situation, the debtors will typically make an initial down payment and the attorney will begin work in the case.  The debtors will provide pay stubs, tax returns, copies of bills, and other relevant information.  Once the attorney has drafted the bankruptcy petition, it is sent to the debtors for review.  Once they have reviewed it for accuracy and returned it to the attorney, the next phase is to collect the necessary funds from the debtors, and for the debtors to take the first credit counseling class and to provide all the necessary pay stubs and other information.  Once everything is in order, the case can be filed with the court.

 

Once the case is filed, notice of the automatic stay can be sent to creditors, payroll departments, and any other relevant party who needs to be notified as soon as possible in order to stop lawsuits, wage garnishments, or other collection activities.  The clerk’s office will also send a B9A Notice of Bankruptcy to the creditors, but that process can take upwards of two weeks after filing.  Any time after the case is filed, the debtors can take the second class, the personal financial management instruction course.  These facts make up the bankruptcy basics.

 

Now that the client has received the proper bankruptcy advice, the next step is to meet with the trustee.  If all goes well, the meeting will be concluded and the trustee will enter a finding of “no assets” or “no distribution” and enter the finding on the record.  Once that happens, the appropriate amount of time must pass to give creditors time to object.  Once the bar date for creditors objections has passed, the clerk of the court will enter the discharge order and the case will be closed.  The typical cases takes approximately 120 days from the day the case is filed to reach completion.

 

There are some things that can go wrong when claiming bankruptcy.  The following is a list of the most common and typical problems in a Chapter 7 case.

• The debtor fails to take the second class.  If this happens, the case will close without a discharge.  The debtor will then have to take the second class, and the attorney will need to file a motion to reopen the case to file the second class certificate.  The clerk will then enter the discharge order.  The process is a huge hassle.
• The debtor fails to list a debt.  In a no-asset Chapter 7 case, if the case is still open, the attorney can file amended schedules to list the debt.  If the bankruptcy case has closed, a copy of the discharge order is typically all that is needed to stop any post-discharge collection action.  In rare and extreme circumstances, it may be necessary to reopen the case and bring a motion for sanctions against the offending creditor.
• The debtor fails to list an asset.  If the asset is not worth liquidating, amendments to the bankruptcy schedules are all that are necessary.  If the trustee is looking to sell the asset to pay creditors, then the case can be converted to Chapter 13 to protect the asset, the debtor can try to work out a buyout of the trustee’s interest, or can simply let the trustee sell the asset.
• Objections to Discharge/Dischargeability.  In rare cases, a creditor, the bankruptcy trustee, or the United States trustee can bring an adversary action to have a particular debt declared non-dischargeable under 11 U.S.C. §523, or have the case rendered non-dischargeable under 11 U.S.C. §727.  In these situations, a debtor will need additional representation at an additional cost – adversary representation is generally not included in the typical bankruptcy fee.