The legal process is daunting to most people. Even being called as a witness in someone else’s civil case or being summoned for jury duty can be stressful. So, it’s no surprise that many people struggling with debt are worried about the legal process associated with bankruptcy. Often, people considering bankruptcy are especially concerned because they are uncomfortable discussing their financial circumstances in a public setting.
If you’re one of the many potential bankruptcy clients with questions about court appearances and what exactly will be expected of them during the bankruptcy case, you will likely be relieved to learn how the Nevada Chapter 7 bankruptcy process typically works.
Although there are issues unique to specific bankruptcy cases, the step-by-step process below describes a typical Chapter 7 case. If there are special issues likely to arise in your case, your bankruptcy attorney can explain those to you during your initial consultation or as they arise during your case.
The Nevada Chapter 7 Bankruptcy Process
Before Filing Bankruptcy – Credit Counseling
Before an individual or a married couple can file for Chapter 7 bankruptcy protection, they must complete credit counseling with an approved provider. This step is intended to ensure that people who are considering bankruptcy have explored other options rather than simply defaulting to bankruptcy because they don’t know what else to do. Although credit counseling is not formally part of the bankruptcy proceeding, it is the first step in the process because the certificate of completion must be filed with your bankruptcy petition.
Credit counseling typically takes about 90 minutes or less, and can usually be completed by phone or online. You can fulfill this requirement at any time during the 180 days leading up to the filing of your bankruptcy petition.
Commencement of the Chapter 7 Bankruptcy Case
A Chapter 7 bankruptcy case commences with the filing of a bankruptcy petition and a number schedules and statements providing information about your financial circumstances. You will also be required to pay a filing fee at the time your petition is submitted. As of May 2019, the filing fee for Chapter 7 bankruptcy is $335.
Completing the schedules is typically the most time-consuming part of the Chapter 7 bankruptcy process, and the one that will require the most participation from the bankruptcy petitioner.
You will provide your bankruptcy attorney with detailed information to complete:
- Schedules of assets and liabilities
- A schedule of current income and expenses
- A statement of financial affairs
- A schedule of any executory contracts and unexpired leases
Your attorney will prepare these schedules and statements using information you provide, so you won’t need to know anything about the specific format or technical requirements. However, it is essential that you provide complete and accurate financial information to your attorney. For example, you will need to provide your attorney with:
- a list of all of your creditors, along with information about the debt such as the outstanding amount and the type of debt
- information about your income, such as your employer, the amount of your paycheck, and how often you are paid
- a list of assets including everything from real estate to bank accounts, jewelry, and even household goods (but don’t worry–much of this property is protected by exemptions)
- detailed information about your living expenses, including the amount of money that you spend on food, clothing, utilities, transportation to work or school, and other regular necessities
Once your attorney has incorporated the information you provide into the schedules and statements, you will review them and sign them under oath.
The Meeting of Creditors
After you file your bankruptcy petition and schedules, all listed creditors will receive notice of the bankruptcy petition. A few weeks after the petition is filed, you will be required to appear at a meeting of creditors (also known as a 341 hearing). For many Chapter 7 bankruptcy petitioners, this is the only appearance required. Most bankruptcy filers never have to appear in court.
The meeting of creditors is less formal than a court appearance, and is overseen by the bankruptcy trustee, not a judge. You will, however, be sworn in and required to answer questions under oath.
For many bankruptcy petitioners, this meeting last only a few minutes. Unless there are specific concerns or irregularities, the trustee may ask only a few simple questions to verify information in your petition and schedules and make sure that you understand your rights and options and have considered the pros and cons of filing bankruptcy. While creditors have the opportunity to appear at the meeting and ask questions, they do not often appear in consumer bankruptcy proceedings.
If a creditor does appear and ask questions, remain calm and answer briefly but honestly. The trustee and your attorney will be there to keep the questioning focused and appropriate.
Completing Your Debtor Education Course
Like the credit counseling requirement, the financial management course is not actually a part of the bankruptcy process. You will complete this course with an outside provider and will typically be able to complete the course over the phone or online. You can take this course at any time after your petition is filed, but don’t delay. The bankruptcy court will not enter a discharge in your case until you have provided proof of completion.
Countdown to Discharge
Your bankruptcy case isn’t over after the 341 hearing, but in many cases the bankruptcy petitioner’s active participation is at or near the end. In the 60 days following the creditors meeting, the case remains active, but often nothing is required of the debtor during this time period. Within 10 days of the hearing, any trustee will advise the court as to whether he or she believes the bankruptcy petition to be an abuse of the bankruptcy process. Determinations that a bankruptcy filing is abusive typically occur only when the debtor has attempted to defraud the court by concealing assets or misrepresenting debts or expenses, or the debtor has too much income to be allowed to file for chapter 7 bankruptcy and receive a discharge.
Creditors have 6o days in which to object to discharge of debts. The objection process involves the filing of a complaint in the bankruptcy court, similar to a civil lawsuit. This is known as an adversary proceeding.
While the circumstances of every case are different, it is rare for a creditor to file an adversary proceeding in a consumer bankruptcy case. For example, in 2017, there were just 313 adversary proceedings filed in Nevada bankruptcy courts, although there were 8760 bankruptcy cases. In addition, most of those adversary proceedings were filed in business bankruptcy cases.
How Long Does Chapter 7 Bankruptcy Take?
The duration of a Chapter 7 bankruptcy case varies, depending on scheduling of the creditors’ meeting, whether there are any creditor objections or other adversary proceedings to address, and even how busy the trustee and the court are. However, it is not unusual for a Chapter 7 bankruptcy case to be resolved, and the debtor to receive a discharge, within four to five months of the date of filing.
Overall, the process is far less of daunting and intimidating then many prospective bankruptcy filers fear. A free consultation with a local bankruptcy attorney can provide more specific information about how bankruptcy might proceed in your particular case.