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The Chapter 7 and Chapter 13 Bankruptcy Process

I want to give you all an idea of the bankruptcy process. I'll try to keep this simple and cover only the "normal" case and not cases involving objections from creditors and other complications.

Once you've chosen a Maryland bankruptcy attorney, provided all of the documentation requested, and paid the required fees, it's time to file your case.

What's the Process for Filing For Chapter 7 Bankruptcy in Maryland?

If you are in a Chapter 7 case, then the procedure is the case gets filed with the Clerk's office in your jurisdiction. Upon the filing, an automatic stay goes into effect. This stay immediately stops your creditors from doing any collection proceedings, including court-ordered garnishments, license suspensions, phone calls, billings, etc... About 4-6 weeks after your case is filed, you will have to attend a "meeting of creditors" or "Section 341" meeting. This is a hearing that debtors are required to attend.

Typically, if you've hired a full-service bankruptcy law firm such as ours, an attorney will be at your hearing with you. An interim trustee appointed by the US Trustee's Office convenes and presides over the hearing, not a judge. This hearing is a time for the trustee to verify the information on your bankruptcy paperwork. The interim trustee's job is to liquidate any non-exempt assets (assets you own that cannot be protected from creditors pursuant to state or federal exemption law - please make sure you consult with an attorney) and to screen for fraud. If you have a good lawyer, the questions won't come as a surprise. The hearing is typically about 5 minutes long.

Once the hearing is concluded, creditors have under the Bankruptcy Code 60 days to file objections to the discharge if the creditor can establish that the debt to it should not be discharged (again, consult with experienced counsel to discuss your specific situation and the attorney should be able to warn you about any potential dischargeability issues before you even decide to file your case). Assuming neither the trustee or the creditors file an objection to discharge, the bankruptcy clerk's office will then issue a discharge.

Most clerk's offices issue discharges about 2 weeks after the 60 day deadline for objecting to discharge has expired. Thus, from the time the case is filed until the time the case is discharged is roughly about 3 1/2 months. There are some things that could happen that will postpone the discharge. If the trustee or creditor objects to discharge, or if a party seeks an extension of time because it wants to do more investigation, then the discharge will be delayed. Usually the discharge is the end of the case and the bankruptcy clerk then "closes" the case. However, if the trustee has to sell some non-exempt assets (see above and speak with experienced counsel about this) then the case isn't over because the trustee is give time to collect property, sell property, set deadlines for creditors to file claims (creditors must file a claim if they want to share some of the money collected by the trustee) and distribute money to creditors on a pro rata basis.

What's the Process for Filing For Chapter 13 Bankruptcy in Maryland?

In a Chapter 13 case, the procedure is much the same in that there is a "meeting of creditors" about 4-6 weeks after the case is filed. However, Chapter 13's require a "confirmation" hearing after the meeting of creditors. This is where the Judge will either accept the plan or reject the plan. If the Judge accepts the plan (meaning that in the judge's opinion the plan complies with bankruptcy law), then the debtor just needs to make the plan payments and once the payments are complete (typically 3-5 years, depending on the terms of the plan), then the court will issue a discharge. So, discharge in Chapter 13 typically occurs 3-5 years down the line.

Creditors can object to confirmation, as can the trustee. If a creditor feels the repayment plan is not paying them a sufficient amount of money, then the creditor can object to confirmation of the plan. Usually the debtor and the complaining creditor resolve the dispute and amend documents to make the creditor happy. However, if the parties can't resolve the dispute, the Judge will rule on the objection either denying the objection and confirming the plan, or sustaining the objection and denying confirmation. If confirmation is denied, then the Trustee will ask the Court to dismiss the case. Denial of confirmation is grounds for dismissal. If the plan is "confirmed" then as above, the debtor just needs to make the plan payments and once the plan is complete, the case will be discharged.

Remember, this is basic information and there can be things that happen during both Chapter 7 and Chapter 13 that I haven't covered here, but I wanted to just give an overview of the important steps in the bankruptcy process. I want to give you all an idea of the bankruptcy process. I'll try to keep this simple and cover only the "normal" case and not cases involving objections from creditors and other complications.

Once you've chosen an attorney, provided all the documentation requested and paid the required fees, it's time to file your case. If you are in a Chapter 7 case, then the procedure is the case gets filed with the Clerk's office in your jurisdiction. Upon the filing, an automatic stay goes into effect. This stay immediately stops your creditors from doing any collection proceedings, including court-ordered garnishments, license suspensions, phone calls, billings, etc... About 4-6 weeks after your case is filed, you will have to attend a "meeting of creditors" or "Section 341" meeting.

This is a hearing that debtors are required to attend. Typically, if you've hired a full-service bankruptcy law firm such as ours, an attorney will be at your hearing with you. An interim trustee appointed by the US Trustee's Office convenes and presides over the hearing, not a judge. This hearing is a time for the trustee to verify the information on your bankruptcy paperwork. The interim trustee's job is to liquidate any non-exempt assets (assets you own that cannot be protected from creditors pursuant to state or federal exemption law - please make sure you consult with an attorney) and to screen for fraud. If you have a good lawyer, the questions won't come as a surprise.

The hearing is typically about 5 minutes long. Once the hearing is concluded, creditors have under the Bankruptcy Code 60 days to file objections to the discharge if the creditor can establish that the debt to it should not be discharged (again, consult with experienced counsel to discuss your specific situation and the attorney should be able to warn you about any potential dischargeability issues before you even decide to file your case). Assuming neither the trustee or the creditors file an objection to discharge, the bankruptcy clerk's office will then issue a discharge. Most clerk's offices issue discharges about 2 weeks after the 60 day deadline for objecting to discharge has expired. Thus, from the time the case is filed until the time the case is discharged is roughly about 3 1/2 months.

There are some things that could happen that will postpone the discharge. If the trustee or creditor objects to discharge, or if a party seeks an extension of time because it wants to do more investigation, then the discharge will be delayed. Usually the discharge is the end of the case and the bankruptcy clerk then "closes" the case. However, if the trustee has to sell some non-exempt assets (see above and speak with experienced counsel about this) then the case isn't over because the trustee is give time to collect property, sell property, set deadlines for creditors to file claims (creditors must file a claim if they want to share some of the money collected by the trustee) and distribute money to creditors on a pro rata basis. In a Chapter 13 case, the procedure is much the same in that there is a "meeting of creditors" about 4-6 weeks after the case is filed. However, Chapter 13's require a "confirmation" hearing after the meeting of creditors.

This is where the Judge will either accept the plan or reject the plan. If the Judge accepts the plan (meaning that in the judge's opinion the plan complies with bankruptcy law), then the debtor just needs to make the plan payments and once the payments are complete (typically 3-5 years, depending on the terms of the plan), then the court will issue a discharge. So, discharge in Chapter 13 typically occurs 3-5 years down the line. Creditors can object to confirmation, as can the trustee. If a creditor feels the repayment plan is not paying them a sufficient amount of money, then the creditor can object to confirmation of the plan. Usually the debtor and the complaining creditor resolve the dispute and amend documents to make the creditor happy. However, if the parties can't resolve the dispute, the Judge will rule on the objection either denying the objection and confirming the plan, or sustaining the objection and denying confirmation.

If confirmation is denied, then the Trustee will ask the Court to dismiss the case. Denial of confirmation is grounds for dismissal. If the plan is "confirmed" then as above, the debtor just needs to make the plan payments and once the plan is complete, the case will be discharged. Remember, this is basic information and there can be things that happen during both Chapter 7 and Chapter 13 that I haven't covered here, but I wanted to just give an overview of the important steps in the bankruptcy process.

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