How Much Time Does Bankruptcy Take?

Have you ever felt someone watching you, or perhaps stalking you? If you file bankruptcy, this feeling is not paranoia. Once you file, your creditors know that they get one more chance to collect. The trustee must review your case thoroughly before making recommendations to the court. A judge performs the final review before either granting or denying your requests.

Going through this process is not as scary as it seems. With quality preparation, your case should glide through each review easily. If you take the time to disclose all information, prepare forms accurately, and comply with the law, you will receive your discharge in record time.

A Chapter 7 case should be complete in as little as four months. The U.S. Code delays the process by establishing statutory requirements for an orderly process. Rules of procedure require court protocols in every case. For instance, your creditors must receive written notice that you filed. In addition, the trustee must schedule a meeting with your creditors, but no sooner than 20 days after you file. After the meeting, the court cannot hold a final hearing for at least 60 days. This delay allows creditors to file objections.

In a perfect case, if everything occurs with precision at the earliest possible time, the court could hold a final hearing in as little as 80 days. In practice however, perfection is an illusion. Court schedules seldom permit such a speedy case. If creditors do not file objections, and the trustee recommends discharge, you should expect a final order in about 120 days. If any party in interest does file an objection, the case lingers until hearings and final orders resolve all outstanding issues.

Chapter 13 cases last at least three years, and up to five years to complete the plan. When the case begins, debtors begin making an estimated payment the first month. The first payment begins to count down toward the completion of the plan. Before the confirmation of the plan, the trustee holds a meeting. Creditors may file objections. The actual payment amount is determined after the court confirms the plan.

Anyone who files a Chapter 13 case may terminate the plan early. In simple terms, this is an option to make all remaining payments in a lump sum, receive a discharge, and receive a final order closing the case. You could use any source of funds. In practice, a few lenders are willing to re-finance home mortgage based on substantial home equity and a history of making plan payments on time.

Chapter 11 cases take at least five years. This type of case is the most complicated and requires a high degree of legal expertise. In effect, most debtors become a debtor-in-possession and assume many of the responsibilities performed by a trustee in the other two chapters. Nevertheless, a trustee monitors the debtor-in-possession. The time and expense required to complete all accounting and other disclosures, including attorney fees, makes these cases so expensive, the cost is hard to justify for most people.

If you are considering bankruptcy, you must begin your preparation early to avoid problems, objections, and negative trustee recommendations. All transactions are suspect during the two years before you file. Some transactions are legal and occur routinely in the ordinary course of living. The U.S. Code also provides an extensive list of illegal transactions.

In the best cases, debtors must tread a fine line between allowed bankruptcy planning and prohibited transactions. In this way, you can receive the greatest benefit available, safely, quickly and legally.

Dave Clark is a prolific writer who enjoys discussing bankruptcy strategies. In this article, he explains how long does bankruptcy last for a curious new friend.