Required steps in the Chapter 7 bankruptcy process

Just like Oscar tells his boss Michael Scott on an episode of The Office, “you can’t just say the word bankruptcy and expect something to happen.” Michael then uses the great ambiguity of the English language by saying he didn’t say it; rather, he declared it. While telling your best buddy or a fellow employee you are bankrupt doesn’t mean anything legally, it can actually be a start to the process. You can’t keep being in denial; if your liabilities are greater than your assets, you must accept the fact in order to get help. Filing a Chapter 7 bankruptcy is a process that takes some time and a lot of information gathering.

According to, Chapter 7 bankruptcy is available to anyone regardless of the amount of your debt. However, you cannot file under Chapter 7 if, in the previous 180 days, you have had a bankruptcy petition thrown out because you failed to appear in court. If there are approved agencies in your area, you must also seek the help of a credit counselor before filing. Finally, you need to decide if you really need it. Chapter 7 bankruptcy appears on your credit report for 10 years, lowering your chances of getting a new loan during this time. This is not a splurge; file for bankruptcy only if you need it!

When you file for Chapter 7 bankruptcy, you will be assigned a case trustee. You will file a petition with the local bankruptcy court. There is a lot of paperwork that goes along with the petition, and that’s putting it lightly. You must also supply schedules of assets and liabilities, current income and expenditures, a statement of financial affairs, and a schedule of executor contracts and unexpired leases. To complete these forms, you need information divided into four subjects: a list of all your creditors and the amounts of their claims; source, amount, and frequency of your income; a list of all your property; and a list of monthly living expenses (which includes everything from food and shelter to transportation and store purchases). A copy of your most recent tax return is also a required document. You must also show proof of the credit counseling you have received, as well as a copy of a debt repayment plan, if any.

About a month after the petition is filed, your case trustee will hold a meeting of creditors. This is to show to the court whether your filing for bankruptcy seems fair or if it is an abuse of the system. Under oath, you will be asked questions about your financial history, and it is also a time to reassure you of the consequences of bankruptcy, such as the negative effect on your credit history, as well as the differences between discharging and reaffirming your debts.

The final part is the actual liquidation, or selling of your property. Nonexempt property may be sold in order to make up for the discharged debt. You also have the option to “reaffirm” certain debts, meaning you will retain responsibility of paying back your creditor some or all of the debt. Some debts, such as alimony and student loans, cannot be discharged. If it seems like a mangled web of terms and paperwork, well, that’s the world of bankruptcy for you.

David Pilley

David Pilley

David Pilley is a May 2010 graduate of the University of North Carolina at Chapel Hill, with a B.A. in communication studies and a creative writing minor. He is a native of Raleigh, North Carolina.

He played clarinet for the Marching Tar Heels in 2005 and 2006. He also volunteered for STV, the student-run television station at UNC-Chapel Hill, in the spring of 2010. He shot video, wrote scripts, and acted for “Off the Cuff,” UNC’s longest running sketch comedy show. He has the rare distinction of having lived in a dorm all four years of his undergraduate college career. He was also on Franklin Street on the night of April 4, 2009. His future plans are to pursue a master’s degree in journalism and to one day work for the media as a sports journalist or broadcaster.

Being one of eight children, David realizes finance is an important topic to everyone, regardless of his/her knowledge of the subject. His interests are in personal finance, budgeting, and savings.

In his spare time, David enjoys watching sports and standup comedy, as well as doing crossword puzzles and writing in the first person. He also thoroughly enjoys trivia and, one day, hopes to participate on the game show Jeopardy!, where he will try to break Ken Jennings’ 74-game win streak.
David Pilley

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