What Happens When You File for Bankruptcy: 7 Events in the First 60 Days

The first 60 days of a bankruptcy case set up the rest of the case. Day one a bankruptcy is filed, collections stop. By day 14 paperwork is due. Within 30 days, certain payments or stay deadlines fall. A meeting of creditors and small business status conference may be scheduled within 60 days. By then utilities are clamoring for deposits, too.

The Automatic Stay

The day you file bankruptcy an automatic stay goes into effect. Most creditors’ attempts at collections, lawsuits, garnishments, or foreclosures must stop. In other words, most creditors’ hands are tied. Keep in mind that this does not include: child support obligations, and certain debts involving taxes. A creditor can file what is called a motion for relief of stay, to stop automatic stay protection of a home. It must make a compelling case.

In Chapter 7, a trustee is appointed. The trustee is not your lawyer. But the trustee is assigned to investigate your case and make sure you did it correctly. It reviews your petition, schedules, and statements to make sure the information you provided is accurate and complete. Chapter 7 is essentially a liquidation type of bankruptcy. So, the trustee is going to determine whether they have any non-exempt assets that they can sell. The vast majority of Chapter 7 cases are “no asset cases”. The trustee typically does not sell items that you are allowed to keep under the exemptions.

It will cost you hundreds of dollars to file a bankruptcy case. If you cannot afford to pay the entire filing fee at the time you file, you can request permission to pay in up to four installments. You must pay the entire filing fee within 120 days from the day you filed the case.

Sometimes the bankruptcy petition is filed with only part of the paperwork completed. You are supposed to file all other required paperwork within 14 days from the date of filing. These required documents include your schedule of assets and liabilities and a statement of your financial affairs. Chapter 13 repayment plans are due within 14 days of filing a bankruptcy petition, unless the court extends that.

You also have to make up your mind whether you want to keep or surrender (give up) your property. You can try to negotiate a reaffirmation agreement, where you promise to continue paying the debt. Or you can redeem it: you offer to make a lump-sum payment in an amount equal to the current market value of the property instead of what you actually owe.

Although a utility company cannot cut off your utilities on day one, they can on day 20 or a few days later. Electric and utilities companies can request a security deposit or adequate assurance. If this payment isn’t made, your electricity could be cut off.

First payment under a Chapter 13 plan is due no more than 30 days after you file the case, even before the plan is confirmed. The automatic stay expires on the 30th day after filing the case if this is the second case filed by a debtor within a year. There are some exceptions. Debtors can keep the stay in effect by filing a motion with the court and showing good faith.

Under the Chapter 13 repayment plan, you make one monthly payment to a trustee. He or she divides the money up among your creditors. Chapter 13 plans last for 3-5 years. The trustee can request a Chapter 13 case to be dismissed if you fall behind on the payment schedule.

Meeting of Creditors

In Chapter 7, a meeting of creditors must be held between 21 and 40 days after the bankruptcy petition is filed. In Chapter 13, it falls between days 21 and 50 of your case. The hearing is conducted by the bankruptcy trustee. You’ll be put under oath. You will be examined and asked questions about your financial situation and the information contained in your bankruptcy petition. Although creditors are invited to the 341 meeting, often they do not show. You must bring photo ID and proof of your Social Security Number. Complete any paperwork requests promptly. Make sure you are organized so you are ready for the hearing and that you bring the documents the trustee asks for.

A Chapter 11 bankruptcy allows a debtor to operate its business. Businesses typically have 120 days to file a plan of reorganization. Your challenge is convincing the court and creditors that your business will be viable during the Chapter 11 plan.

If you’re in a Subchapter V case, there is a status conference on or before day 60. A status report has to be filed no later than 14 days before this conference. The deadline to file a Subchapter V reorganization plan is 90 days.

There are two different limits for the debt ceiling your small business faces to use Subchapter V. The limit for cases filed today is $3,424,000. The debt ceiling would be permanently increased to $7.5 million for cases filed after H.R. 7730 becomes law.

The next 60 days are equally important. This is because so many deadlines fall around the 60 days after the date the creditors meeting (341 meeting) is held. You have to complete an approved debtor education course. Financial management course - also known as debtor education course - and certificate must be submitted within 60 days of the 341 meeting of creditors. If it is not filed on time, you could face dismissal of the case. In a chapter 7, a creditor has until 60 days after the meeting of creditors was first scheduled to object to discharge.

Before any of this, you have to complete a credit counseling course in the 180 days before you file a bankruptcy case. Don’t transfer any property to friends or relatives. Gather paperwork. Examples include tax returns, income stubs, and bank statements.

There are a lot of steps in the process. You have a lot to prepare. The filing is complex. A lot of money is on the line. Before filing your case, it is a very good idea to discuss this with a bankruptcy attorney.