What to Expect In Your SC Bankruptcy Case
While there is no such thing as a "typical" consumer bankruptcy case, there are certain common events and tasks that most consumer debtors will face upon filing for Chapter 7 or 13. Of course, every case is different, and these steps may take place in slightly different order, or there may be additional time between events, or additional events and appearances required, depending on the specific facts of your case.
Additionally, it's important to realize that, although bankruptcy is a federal matter, governed by federal law and taking place in federal courts, the application of state law and state- or district-specific rules makes a lot of difference. If you're reading this and are located in a state other than South Carolina, be advised that your experience (and the law applicable to your case) may vary widely from what is described here. Conversely, if you are in South Carolina but have done Internet research using out-of-state materials, you may also find the description differs greatly from what you've read about previously.
The Bankruptcy Petition and Schedules
Generally, however, cases begin with the filing of a petition and related documents called schedules, detailing the debtor's financial condition - property, both real and personal, as well as secured debts, unsecured debts, liens on property, outstanding judgments, and a new form, B22, which contains a complex calculation of something called "current monthly income" - which, unfortunately, is not as simple as it sounds. (For more information on the new law and the changes it made to bankruptcy practice in South Carolina and elsewhere, see my article "More on the New Bankruptcy Law: Myth and Reality.") However, prior to filing, all consumer debtors must attend a credit counseling session offered by an approved agency and receive a certificate of completion from that course. Failure to obtain that certificate will result in dismissal of the case. This is a highly technical rule that most courts have interpreted strictly; however, you should not take the course prior to consulting an attorney, as there are timing considerations and limitations that could trip up the unwary.
These documents are electronically filed with the Bankruptcy Court, and from that moment of filing, the automatic stay is in place (with some exceptions for certain repeat filers). The stay is mandated by statute and gives each debtor a little bit of breathing room and time to relax, without the pressure of collection attempts, foreclosure proceedings, or repossessions of secured-debt property.
The Creditors' Meeting
The next major event for the debtor is usually the creditors' meeting. While the name makes it sound otherwise, very few creditors actually attend these meetings when a consumer is the debtor, barring special issues concerning significant property or high income. This is the bankruptcy trustee's opportunity (along with any creditors who attend) to question the debtor concerning his or her financial affairs. Questions may address any aspect of the petition or schedules; as your attorney, I will attend the meeting with you to make sure the questions are proper and do not cross into impermissible matters.
In a Chapter 13 case, the debtor will begin making payments under the plan to the bankruptcy trustee thirty days after the petition is filed, while the plan itself is still pending confirmation from the court. In a Chapter 7 case, the next major event will be the trustee's liquidation of any estate property that is not exempt; the proceeds of that liquidation will be distributed among the debtor's creditors who have filed allowed claims. Many Chapter 7 debtors will have no non-exempt property, and thus this step may not occur at all.
Mortgages and Other Secured Debts
A note about mortgages: During a case under any chapter, you will continue to make your mortgage payments, before and after the discharge. A lot of debtors do not understand this point, and are confused by it. A discharge does not mean that you no longer have to pay your debts secured by liens on property; unless the lien was avoided or the property turned back over to the creditor, the lien survives the bankruptcy. What the discharge does is erase what's called "personal liability." But if you want to keep your house, for instance, you'll still have to make those mortgage payments!
The Bankruptcy Discharge: The End!
Finally, the debtor will receive a discharge of his or her debts. In a Chapter 13 case, that will occur at the end of the plan (3 to 5 years under the Code, but in South Carolina usually 4 or 5 years), or upon grant of a hardship discharge. In a Chapter 7 case, that usually occurs fairly soon after the time for objections to claims has passed. After the discharge, a few wrap-up matters may need to be taken care of by the debtor's attorney (such as ensuring that any liens which have been avoided during the bankruptcy case have been properly recorded and noted in public records and consumer reports), but by and large for the debtor, the process is over!
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The Law Office of Sheryl Sisk Schelin is a debt relief agency under the laws of the United States, including the Bankruptcy Code, and assists its clients by helping them to file for relief under the Bankruptcy Code, among other solutions, and as appropriate to their individual needs.