Almost all bankruptcy cases in Western Washington follow the same chronology. The following chronology gives a general idea of how a bankruptcy proceeds.
- A bankruptcy case begins with a “Voluntary Petition.” In most cases, preparing and filing your petition is the hardest part of the process. The petition is a complex and detailed document which contains an exhaustive set of information concerning the petitioner, his assets and debts. The voluntary petition also includes a characterization of debts, which is essentially a matrix which lists your debtors by priority. It is important that you provide your lawyer with detailed and updated information so that your lawyer can prepare this document accurately.
- Petitions under Chapter 7 of the Bankruptcy Code discharge your debts.
- Petitions under Chapter 13 of the Bankruptcy Code allow you to pay most of them off over time.
- Petitions under Chapter 11 of the Bankruptcy Code deal with business reorganizations.
- When you file a bankruptcy petition federal law imposes an "automatic stay" which prevents your creditors from taking any action to collect debts against you. The automatic stay is a powerful tool to immediately stop all collection efforts, including court judgments, tax debts, and foreclosures. For instance, if you have been served with a lawsuit by one of your creditors to appear in court over a debt, the bankruptcy filing will stop this lawsuit.
- Within a month after you file the Bankruptcy Court will send out a “Notice of Filing” and a “Notice of Stay” to your creditors. These notices make it illegal for your creditors to continue trying to collect from you, although they are free to contact your attorney. If you are contacted before the notices go out, tell the creditor that you have filed a bankruptcy petition and give them the bankruptcy court docket number. If you do not know the docket number, or the creditor asks more of you, don't hesitate to refer them to your attorney.
- Between four and six weeks after the filing of the petition, you will have to attend a "Meeting of Creditors" chaired by the bankruptcy trustee assigned to your case. Although this is a meeting of creditors, your creditors need not attend. The only persons required to attend the meeting are the debtor (and his attorney), and the bankruptcy trustee. Most credit card providers choose to attend this meeting. Unless there is a "red flag" that alerts the trustee that your case is unusual, this meeting will be very brief, sometimes just two to three minutes. Generally, the Trustee will ask you a few standard questions related to your petition and then will give any creditors present at the meeting the opportunity to ask you some questions, as well.
- Additional step for Chapter 13 cases: If you are filing under Chapter 13, you and your attorney will have to discuss and propose a payment plan. Once the payment plan is approved, you will receive a “Notice of Confirmation of the Plan.” Your payment plan will usually be on a timeline of three or five years.
- If the creditors have problems with your petition, they have a certain amount of time to file an adversary proceeding. An adversary proceeding asks the bankruptcy court to refuse to discharge a certain debt for some particular reason. The most common reason is fraud, either giving rise to the debt (i.e. if you got the money by stealing from your employer) or in the bankruptcy itself (i.e. lying on your bankruptcy petition or hiding your assets). An adversary proceeding can take months or years to be resolved. Adversary proceedings are as uncertain as any other litigation, although most bankruptcy courts are fairly vigilant about moving them through the system quickly. In the meanwhile, your discharge of these debts will be delayed until the adversary proceeding is resolved.
- If there are no problems with your Chapter 7 petition, or once you have paid off your creditors under a Chapter 13 plan, or once any adversary proceedings are resolved, you will receive a “Notice of Discharge.”
- The entire process can take from as little as three months to as long as five years.