In all bankruptcy cases, the debtor must meet with the bankruptcy trustee. This is called
the Meeting of the Creditors or the 341 Meeting. It occurs 30 days after the case is filed.
At the 341 meeting the trustee may ask if you received a copy of the Bankruptcy Information Sheet.
Debtor: The person who borrowed money and is now filing bankruptcy.
Creditor: A company or individual who lent money to a debtor.
Secured Debt: Debt secured by collateral, such as a mortgage secured by a house, or a loan secured by a car or boat. The asset, i.e., the house or car, is collateral for the loan.
Unsecured Non-priority Debt: Debt in which there is no security or collateral, such as a credit card or a medical bill.
Unsecured Priority Debt: Debt in which there is no security or collateral, such as alimony, child support, most taxes and student loans.
Reaffirmation Agreement: An agreement written by a secured creditor where the debtor agrees to keep the collateral and continue making the payments.
Means Test: A form that must be completed that shows if a debtor qualifies for a Chapter 7 bankruptcy, or to show the amount of disposable income that is available to pay to unsecured creditors.
Automatic Stay: When a bankruptcy case is filed, all debt collection and lawsuits must stop.
Chapter 7 Bankruptcy is commonly referred to as a “Liquidation” or “Straight Bankruptcy”. When a petition for Chapter 7 Bankruptcy is filed, a bankruptcy estate is created and a bankruptcy trustee is appointed to the case. Also an automatic stay is put in place so all collection activity against the debtor stops temporarily. The assets and the debts of the debtor become part of the bankruptcy estate. The debtor must list what assets are exempt and why they are exempt. In some cases all of the assets of the debtor are exempt and the debtor does not lose any assets. In other case all of the assets are not exempt and some items must be surrendered to the bank trustee for liquidation. Typically, the trustee will allow debtor the first opportunity to buy back assets.
Approximately 30 days after the bankruptcy petition is filed a meeting of the creditors is held where the bankruptcy trustee asks questions of the debtor. Also, creditors may attend this meeting to hear what the debtor has to say and possible ask questions also. If there are no objections, the Court will enter an order discharging some debts. It must be remembered that not all debts can be discharged. Secured debts, such as a debt secured by mortgage or security agreement, cannot be discharged unless the asset/collateral is surrendered. Also, priority debts like child support and alimony are not dischargeable. A Chapter 7 Bankruptcy is helpful to a person because it stops collection calls and discharges debts that the person cannot pay. It may help a person in foreclosure because (1) it may free up some funds to help make the mortgage payment, or (2) it may temporarily stop the foreclosure case and give additional time to try to work out a settlement with the lender.
Chapter 13 Bankruptcy is commonly referred to as a “Reorganization”. Just like a Chapter 7 Bankruptcy, when a petition for Chapter 13 Bankruptcy is filed a bankruptcy estate is created and an automatic stay is put in place so all collection activity against the debtor stops temporarily. A bankruptcy trustee is appointed and a meeting of the creditors is held. However, in a Chapter 13 Bankruptcy the debtor must file a reorganization plan with the Court. A reorganization plan basically sets forth how the debtor proposes to restructure and pay debts within the next 36 or 60 months. Also, with a Chapter 13 Bankruptcy some unsecured debts may be partially or completely discharged. If there are no objections to the reorganization plan, the Court will enter an order confirming the plan. A Chapter 13 Bankruptcy is helpful to a person because it gives them a chance to restructure their debt in a fashion to they can afford. Also, it may be helpful to a person in foreclosure because (1) it may free up some funds so they can afford to make the mortgage payment, and (2) it may give you 36 to 60 months to pay the mortgage arrearage.