This is the most common type of bankruptcy filed, and is generally the most straightforward and least time consuming. It is known as a “Liquidation Bankruptcy” or a “Straight Bankruptcy”. For the most part, a Chapter 7 Bankruptcy allows you to discharge most of your debt and takes approximately 3 to 4 months to complete from the time you file.
In order to file a Chapter 7 Bankruptcy, you must first qualify. There are certain restrictions imposed on Chapter 7 filers, which involve income levels and reasonable expenses. You are also prohibited from filing a Chapter 7 Bankruptcy if you have filed and received a discharge in a bankruptcy within the last 8 years. You should discuss your options with an attorney to understand your qualifications and if you fall under any exceptions.
Filing a Chapter 7 Bankruptcy does not mean you have to hand over all of your assets. You can generally keep most of these, including your home, cars, clothing, furniture and more. Under California law, you have options, regardless of whether you have equity in your home or are underwater. Regardless of which option is best for you, you can almost always keep retirement plans you receive through an employer (or rolled over from one), furniture, clothing, and jewelry. Even if you have an excessive level of assets, you can work with your attorney and the trustee appointed to your case to determine what, if anything, you may need to surrender.
The timeline in a Chapter 7 Bankruptcy is fairly consistent. First, you must complete the bankruptcy petition, gather all necessary documentation and complete a credit counseling course. After completing the initial paperwork and requirements, you can file your Chapter 7 case. Approximately 20-40 days after filing, a “Meeting of Creditors” is set for your case. A Trustee is appointed to your case to act as an administrator in processing your case and ensuring that the information is accurate. You will also be required to complete a second financial management course before the completion of your bankruptcy case.
A “Meeting of Creditors” is then set for approximately 20-40 days after the date you file. If filed in San Diego County, this meeting will be held downtown and is an opportunity for the trustee to ask questions and verify that the information in your bankruptcy petition is accurate. It is also an opportunity for creditors in your case to ask questions; however, they can only ask very specific questions and cannot use the meeting as an opportunity for “digging” or searching for miscellaneous information.
After the Meeting of Creditors, and assuming there are no outstanding issues in your case, your part in the bankruptcy process is complete. In general, you can then expect a court order discharging your case and the corresponding debt approximately 60 days after your meeting. Once your discharge order is issued, your debts are officially eliminated and your path to financial recovery begins.