The minute you file your Chapter 7 case, all creditor action against you will come to a screeching halt. The instant a case number is assigned, a powerful legal protection called the “automatic stay” goes into force. The automatic stay applies whether or not the creditor knows about it or not.
If a creditor is in the process of collecting a debt – such as garnishing your wages or calling you repeatedly, they must stop. If they intentionally violate the automatic stay, you can file a contempt action against them in bankruptcy court and collect damages.
The automatic stay applies to just about every type of creditor action, including:
- bill collector phone calls
- bill collection letters
- lawsuits
- wage garnishments
- bank account levies
- most tax collection activities
- repossessions
- foreclosures
The automatic stay will not apply to:
- criminal prosecutions
- child support or alimony matters
- driver’s license suspensions
- issuance of certain tax notices (but it does stop most tax collection efforts)
- residential eviction procedures (in some situations only)
- further the automatic stay may not apply if you recently filed a bankruptcy case that was dismissed or discharged
Court Proceedings After Filing Chapter 7
About a week or so after filing you will receive a written notice from the Clerk of Bankruptcy Court called a “Notice of Commencement of Case.” This notice will advise you about important dates related to your case.
The first (and usually only) court appearance you will have to make is at a hearing called a Section 341 Meeting of Creditors. This hearing, which will last about 5 minutes, is presided over by your Chapter 7 trustee, not the judge. The purpose of the 341 hearing is for the trustee to verify that the information in your schedules is accurate and to inquire about your financial situation in general.
This hearing will be scheduled for a date about 30 to 40 days after you file.
Normally the 341 hearing is your only required appearance. In rare cases, a creditor or the trustee will file an objection necessitating an additional hearing or hearings.
Case Will be Over in About 5 Months
Typically, a Chapter 7 case lasts about 5 months, start to finish. Assuming that there are no problems, your trustee will process your case for a discharge, which is a formal order from the judge canceling your legal obligations to pay creditors. This discharge order protects you from any future creditor action.