How Long Does the Bankruptcy Process Take?
If you're dealing with overwhelming debt, bankruptcy is a useful tool for discharging most unsecured debts and regaining financial stability. However, bankruptcy is not a quick fix. It can take considerable time, anywhere from a few months to a few years depending on the type of bankruptcy case/petition you file.
Understanding how long the bankruptcy process is important for managing your finances and getting your life back on track. The Law Office of Marc G. Alster is dedicated to helping clients in both New Jersey and New York manage their financial challenges and understand how long the bankruptcy process both usually requires and can potentially require if problems arise.
Factors Influencing the Bankruptcy Timeline
The duration of a bankruptcy case depends on various factors, including the type of bankruptcy filed, the complexity of the debtor's financial situation, and the efficiency with which both the Bankruptcy Court and the Bankruptcy Trustee, who is appointed by the Court, handle the case. No two bankruptcy cases are alike, so the timelines can vary significantly depending on your specific circumstances.
The Complexity of Your Financial Situation
The complexity of your financial situation greatly influences the duration of the bankruptcy process. Certain factors can prolong proceedings, such as:
High debt amounts
Numerous and significant assets that may not be able to be fully protected under the numerous Exemptions available under the US Bankruptcy Code.
Complicated tax or other issues about secured, priority, or unsecured creditors.
Creditor disputes
Consulting with an experienced bankruptcy attorney can significantly streamline and take much of the stress out of the process by helping you ensure all helpful and necessary documents are accurately prepared ahead of time, any potential legal issues are addressed before your bankruptcy case is ever filed, and once your case is file that your Court deadlines are met.
Efficiency of Court Schedules and Timelines
How the Court handles your bankruptcy case can also impact the potential time frame. Court schedules, caseloads, and local court guidelines can either expedite or delay the process. Working with a local attorney like the Law Office of Marc G. Alster can help you better understand how the current Court schedule and how it can impact your bankruptcy proceedings.
Chapter 7 Bankruptcy Timeline
Chapter 7, often known as liquidation bankruptcy, is generally the fastest form of bankruptcy. Upon filing a Chapter 7 petition, a bankruptcy trustee is appointed by the court to determine if any of your assets can be liquidated/sold, with the proceeds used to pay back creditors.
The liquidation/sale of a debtor's assets is very infrequent; Mr. Alster will know if there is any chance of this happening as long as you provide the necessary, pertinent information to him at your consultation. See another article on this website entitled "Preparing for Bankruptcy". In most Chapter 7 cases that go smoothly, the process typically takes between 3 to 4 months from the filing date to procure your sought-after Discharge Order discharging all dischargeable debts.
However, this timeline can be influenced by specific factors that may cause a Bankruptcy case to be contested. As long as Mr. Alster's prospective clients come in prepared with the necessary financial information, Mr. Alster will be able to tell if any of a debtor's assets might be placed in jeopardy by filing a bankruptcy petition, and/or the debtor's case might otherwise become contested. See the article on this website entitled "The Chapter 7 Bankruptcy Process".
The rough timeline for completing a Chapter 7 bankruptcy case typically includes the following steps:
Qualifying for a Chapter 7 discharge: In addition to protecting a prospective debtor's assets, to qualify for Chapter 7 debtors must pass what is known as the Bankruptcy Code's Means Test, which compares your income against the median income in your state. If your current monthly income is lower than the median, you will qualify under the Means Test. Even if your income is above the median income, you will still likely qualify under the Means Test due to the generous deductions from their income debtors are allowed under the Bankruptcy Code, and New Jersey having one of the highest median incomes in the country. See the article in our website entitled "The Bankruptcy Means Test".
Debtors will also have to pass the Bankruptcy Code's historical good faith test and other qualifications, which Mr. Alster will be able to accurately determine at your bankruptcy consultation. See the article in our website entitled "The Bankruptcy Means Test" and "Preparing for Bankruptcy"..
You will need to provide thorough and accurate documentation to support your petition, which will have to be provided to the court-appointed Chapter 7 Trustee by Mr. Alster shortly after your case is filed. Failure to provide this documentation to the Trustee shortly after the case is filed can potentially lead to delays and the potential dismissal of debtors' cases by the Bankruptcy Court. See the article in this website entitled "Preparing for Bankruptcy".
Filing your bankruptcy petition: Once you pass the means test and Mr. Alster otherwise qualifies debtors to file for Chapter 7 protection, a determination is made, with Mr. Alster's advice, as to when it is best to file a petition with the Bankruptcy Court.
Meeting of creditors: About 25 to 35 days after you file your petition, you will need to attend a meeting of creditors. During this meeting, both the Court-appointed Chapter 7 Trustee and creditors have the opportunity to ask you questions about your financial situation. The purpose of this meeting is to determine if any of the debtor's assets can be sold by the Trustee and to make sure that the debtor's case has been filed in good faith.
The Chapter 7 trustee's abandonment of the debtors' assets or the liquidation of nonexempt assets: After the meeting of creditors, your trustee will likely abandon all of your real and personal property/assets, assuming all of your assets are "exempt", or the Trustee will begin the liquidation of non-exempt assets. This is very rare - see the other articles in our website entitled "Bankruptcy Exemptions", "Protecting Debtor's Assets" and "Preparing for Bankruptcy". The process can take anywhere from a few weeks to several months or even years, depending on if any of your assets cannot be protected by the Bankruptcy Code's numerous exemptions and the complexity of a debtor's assets. See the other articles in this website referred to directly above.
Debt discharge: Once the Trustee has abandoned his/her interest (also known as the Bankruptcy Estate's interest) in all of the debtors' property, debtors will receive a Discharge Order issued by the Bankruptcy Court, officially releasing/discharging debtors from all qualified debts listed in your bankruptcy petition. This usually occurs within 3 to 4 months after filing for bankruptcy if there are no nonexempt assets that can be sold by the Trustee, and/or there are no other significant objections filed by the Trustee or the debtor's creditors.
Chapter 13 Bankruptcy Timeline
Chapter 13, also known as a "wage earner's plan," is designed for individuals with a regular income who want to repay debts over time. This is a more structured form of bankruptcy that allows you to propose a plan for repaying your debts over three to five years. This process is considerably longer than the Chapter 7 bankruptcy timeline, but allows you to retain your assets while working to pay back your debt. It also allows debtors to catch up on arrearages owed to secured creditors, such as mortgages, for a period of up to 60 months last 5 years
The additional steps in the Chapter 13 timeline, over and above those already explained in the Chapter 7 timeline, include but are not limited to the following:
Creation of a repayment plan: You must first develop a feasible and realistic Chapter 13 repayment plan that outlines how your debts will be repaid using your future income, the proceeds of the sale of your property, and/or the financial support from friends and family. This is necessary for the Court to approve your Chapter 13 Plan; without it, your Chapter 13 petition/case will be denied. See the other article in our website entitled "An Overview of the Chapter 13 Process".
File the Chapter 13 Bankruptcy petition: Similar to Chapter 7, you will also need to file a detailed petition with the Bankruptcy Court, alongside your Chapter 13 repayment plan. You will need to provide detailed evidence such as paystubs, deposit receipts, etc. that support your ability to complete your Chapter 13 repayment plan.
Attend a confirmation hearing: During this hearing, the Court will evaluate your Chapter 13 repayment plan and either approve or deny your Plan. Court approval is required for you to move forward. Your hearing will typically be scheduled within 45 days of the filing of your petition.
Make the required payments: Once your Chapter 13 petition is filed your monthly payment Chapter 13 Plan obligations (Plan payments are almost always monthly) begin even before your plan is confirmed by the Court. Plan payments are submitted to your Chapter 13 bankruptcy trustee, who will then distribute the payments to your creditors. A significant benefit of Chapter 13 is that it allows you to combine all your debts into one monthly payment. See the other article in our website entitled "An Overview of the Chapter 13 Process".
Completion and discharge: After completing your repayment plan, your remaining eligible, unpaid, unsecured debts, if any, will be discharged. This marks the end of the Chapter 13 process. However, it's important to remember that your repayment timeline will typically take three to five years.
Long-Term Impacts of Bankruptcy
Once the bankruptcy process is complete, you can begin rebuilding your financial future. However, it's important to note that filing for bankruptcy will often have continued impacts after the initial bankruptcy proceedings have concluded. These impacts can include:
A negative impact on your credit score from 10 years for a Chapter 7 Bankruptcy, and 7 years for a Chapter 13 bankruptcy. See the other article on our website entitled "Rebuilding Your Credit".
A temporary inability to obtain favorable loans from banks or financial institutions. However, it's important to realize that most people can rebuild their credit scores on file with the three national credit reporting agencies, Experian, Equifax, and Transunion as early as one to two years after receiving their Discharge Order from the Bankruptcy Court. See the other article on our website entitled "Rebuilding Your Credit". Mr. Alster can also speak to you more about this in our office.
With responsible budgeting and financial management, it's possible to rebuild your credit over a surprisingly short amount of time and improve your overall financial situation. Working with a trusted bankruptcy attorney can help you overcome these long-term consequences and make informed decisions during and after bankruptcy. See the other articles in this website referred to in this section above.
Seek Experienced Counsel from a Skilled Bankruptcy Attorney
It's important to understand how long the bankruptcy process will take to set realistic expectations and plan ahead. Timelines can differ based on various factors, but consulting with an experienced bankruptcy attorney can help make the process more manageable. If you or someone you know is considering bankruptcy, reach out to The Law Office of Marc G. Alster to schedule a consultation.
Located in Hackensack, New Jersey, the firm serves clients throughout northern and central New Jersey, including Bergen County, Passaic County, Hudson County, Essex County, and Union County as well as Rockland County, Westchester County, Orange County, and Putnam County in New York. As to wh
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