When bills pile up with no end in sight, bankruptcy can provide the relief you need. But many don't know how long it takes to file for bankruptcy and to discharge (wipe out) debt.
The good news is that in most cases, a Chapter 7 bankruptcy discharges heavy debt within four months. Not only is the filing process quick, but unlike a Chapter 13 bankruptcy, qualified debtors (filers) don't make monthly payments to creditors over the course of a three- to five-year repayment plan.
Chapter 7 Bankruptcy Discharge Timeline
While it's possible that you could receive a discharge within as few as 82 days after filing your case, it would be unusual. The court usually needs an additional twenty days to accommodate scheduling and other procedural requirements.
So that you'll know what to expect, the Chapter 7 discharge timeline below covers all aspects of a typical bankruptcy filing, from the initial gathering of documents up until receiving the discharge, and should help clarify how long it will take to get a Chapter 7 discharge:
- Gathering documents. You'll start by locating financial information, such as bills; banking, retirement, and investment account statements; paycheck stubs; and tax returns.
- Preparing the paperwork. You'll disclose all aspects of your finances on official bankruptcy forms. Once completed, the average bankruptcy petition, including schedules and other required documents, will be between 35 and 50 pages.
- Completing the credit counseling course. If you're an individual bankruptcy debtor, you'll also need to take a credit counseling course from an approved provider. Business entities are exempt from this requirement. Most courses can be completed online within a few hours.
- Filing the paperwork. After completing the forms and counseling requirement, the bankruptcy paperwork and counseling certificate gets filed with the clerk of the bankruptcy court along with the filing fee, request to pay in installment payments, or fee waiver. The filing not only starts the case but, if this is the first time you've filed, the automatic stay order that stops most creditors from collecting against you will go into effect immediately. If you've filed multiple bankruptcy cases in quick succession, the stay might last only 30 days, or might not go into effect at all.
- Notifying the creditors. Within a few days, the court will send a Notice of Chapter 7 Bankruptcy Case to you and your creditors. It will include the bankruptcy case number and explain whether the case is an asset case (money will be available for creditors) or a no-asset case. The notice will also provide the date, time, and location of the 341 meeting of creditors (the hearing all bankruptcy filers must attend) and creditor filing and objection deadlines (more below). The 341 meeting of creditors will be set at least three weeks after your filing date, but not more than 40 days later. Because creditors won't receive notification immediately, you or your attorney will need to make the creditor aware of the bankruptcy filing to stop a foreclosure, wage garnishment, or lawsuit.
- Filing the debtor education certificate. You must complete the second course, called the debtor education course, after you file your case. You can take it as soon as you receive your bankruptcy case number. The certificate should be filed with the court no later than 60 days after the first 341 meeting of creditors date (more below). Otherwise, your case will get dismissed and you won't receive a discharge wiping out your debt.
- Providing 521 documents. You must turn over particular documents, such as bank statements, paycheck stubs, and tax returns, to the bankruptcy trustee (the official who oversees your case) at least seven days before the initial 341 meeting of creditors date. The trustee will use the documents to verify information provided in your petition before the meeting.
- Attending the 341 meeting of creditors. At the meeting, you'll provide identification verifying your identity and will answer questions about the accuracy of your petition under oath. Creditors can appear for questioning but rarely do. In a straightforward case, the time spent before the trustee averages five to ten minutes.
- Passing the deadline for creditors to object. Creditors can object to the court discharging its debt but must do so within 60 days of the first day set for the 341 meeting of creditors. The court will wait until this deadline passes before issuing the discharge.
- Receiving the discharge. After the completion of the above steps, the court will issue an order of discharge erasing your qualifying debt. You'll get a copy in the mail a few days later.
In most cases, the court will close your case shortly after issuing the discharge order—but not always. For instance, if the trustee is selling assets that take time to liquidate, such as real estate, you can expect your case to remain open for up to an additional year or so after receiving the discharge.
(Find out what happens after the court closes your matter in Life After Bankruptcy.)