After you submit your petition for chapter 7 bankruptcy or chapter 13 bankruptcy, creditors are required to stop contacting you to collect any payments. Instead, your debts will be supervised by a court-appointed bankruptcy trustee. This individual acts as the middleman between you and your creditors.
Once you file your paperwork, there are certain proceedings that need to take place before any of your debt is discharged.
Filing for bankruptcy means that your creditors will be notified. A meeting of creditors will take place between 21 and 50 days after you file your paperwork. You are typically required to attend this meeting.
During this meeting, the bankruptcy trustee will go over the bankruptcy process with you to ensure you know the next steps. You will be required to answer questions under oath about your case, including information about your debt and your income. Creditors may or may not attend this meeting.
If you file for personal bankruptcy, you must attend the meeting or risk having your case dismissed by the trustee.
Declaring bankruptcy is a complicated process, which is why you are required to take a debtor education course before your debt is dismissed. This is sometimes referred to as Personal Financial Management (PFM). The course must be approved by the U.S. Trustee Program and must run for at least two hours.
The course reviews a variety of financial-related topics, such as:
- Establishing a budget
- Creating financial goals
- Creating an emergency fund
- Classifying expenses
Filing for bankruptcy is public record. This means that it gets attached to your credit history. You can expect to see a drop in your credit score immediately upon filing. Your score may drop between 100 and 200 points. However, over the long run, your credit score will slowly improve.
A chapter 7 bankruptcy stays on your credit report for 10 years, while a chapter 13 bankruptcy stays on your credit report for 7 years. After these timelines, the bankruptcy report will automatically be removed from your credit history.
To rebuild your credit, it is important to make your payments on time. You may consider getting a secured credit card to begin your new credit history. However, you should avoid borrowing more than you can repay.
It is also important to pay off any bankruptcy filing fees. If you consult a bankruptcy attorney, you may have to pay certain fees over time. Likewise, there are typically chapter 7 bankruptcy and chapter 13 bankruptcy filing fees that you must pay. You may be able to break these fees into installments.