If you’re facing an emergency, like a foreclosure or repossession in the next few days, you can file just the two-page petition, but you must file the rest of the forms within 15 days.
Bankruptcy’s Magic Wand — The Automatic Stay
Filing for bankruptcy puts into effect an “Order for Relief” — known informally as the “automatic stay.” The automatic stay immediately stops most creditors from trying to collect what you owe them. So, at least temporarily, creditors cannot legally grab (“garnish”) your wages, empty your bank account, go after your car, house, or other property, or cut off your utility service or welfare benefits.
Bankruptcy Court’s Control Over Your Financial Affairs
By filing for bankruptcy, you are technically placing the property you own and the debts you owe in the hands of the bankruptcy court. You can’t sell or give away any of the property you own when you file, or pay off your pre-filing debts, without the court’s consent. However, with a few exceptions, you can do what you wish with property you acquire and income you earn after you file for bankruptcy.
The Bankruptcy Trustee
The court exercises its control through a court-appointed person called a “bankruptcy trustee.” The trustee’s primary duty is to see that your creditors are paid as much as possible on what you owe them. And the more assets the trustee recovers for creditors, the more the trustee is paid.
The trustee (or the trustee’s staff) will examine your papers to make sure they are complete and to look for nonexempt property to sell for the benefit of creditors. The trustee will also look at your financial transactions during the previous year to see if any can be undone to free up assets to distribute to your creditors. In most Chapter 7 cases, the trustee finds nothing of value to sell.
The Creditors Meeting (a/k/a the “341 Meeting”)
Shortly after you file, you (and all the creditors you list in your bankruptcy papers) will receive a notice that a “creditors meeting” has been scheduled. The trustee runs the meeting and, after swearing you in, will ask you a fairly standard set of questions questions about your assets, debts, income, and expenses. The trustee will ask you whether the information in your papers is 100% accurate. Creditors rarely attend this meeting, but if they do, they may question you under oath about where collateral is located or about information you gave them to obtain the loan, or anything else that relates to your debt to them.
This meeting, which takes place somewhere in the courthouse, rarely lasts more than ten minutes. In the vast majority of Chapter 7 bankruptcies, this is your only visit to the courthouse.