What is the Bankruptcy Process?
The commencement of a bankruptcy case is begun by completing the required “Debtor’s Education Course” required by the Bankruptcy Code and a filing of a bankruptcy “Petition”.
A trustee is then appointed. The debtor lists all of his property in his petition. He lists all his assets, all his creditors and his exemptions in the bankruptcy petition. He then turns over all of his nonexempt property to the trustee. You will need to talk with me about what is to be turned over to the Trustee. The trustee locates all property and then schedules a creditors meeting. This meeting is called a Section 341 (a) “Meeting of Creditors. What property is to be surrendered is a subject of the 341 meeting.
Creditors have an opportunity to appear at the 341 hearing to question the debtor about these assets and their petition. If one of the creditors believes that they have a debt which is nondischargeable, they can file a complaint to determine the dischargeability of the debt. The debtor is then required to defend the complaint objecting to the discharge of that debt. The trustee investigates the debtor’s conduct and may file his own complaint- but this usually does not happen. The debtor through his attorney files to avoid liens which he wants to discharge or which may impair his exemptions. The trustee collects property of the estate, recovers improper transfers such as post petition and fraudulent transfers, and avoids any transfer that is avoidable such a preference and/or unperfected security interests.
The debtor may reaffirm any debts that he desires, but he must obtain court approval. (Sometimes this is difficult to accomplish because the court does not want the debtor in financial trouble again- but it can be done.) The debtor may redeem property or debts subject to non-reportable liens. The trustee then liquidates or abandons all the property collected depending upon the claims and ease and profitability of liquidation.
The trustee reviews and objects any claims necessary. If the debtor has completed the financial management course required by the court the debtor then obtains a discharge. Otherwise he receives a dismissal. The proceeds of the liquidation by the trustee are then distributed to the creditors. The debtor receives all of property the trustee abandons and all surplus proceeds from the liquidation after the creditors are paid in full. The case is then closed and the matter concluded.