So how does the whole thing work?

Step 1:  CASE PREPARATION.  Your lawyer will collect a lot of information from you about your income, expenses, assets, liabilities, and personal circumstances.  The initial consultation might start with, “tell me what’s going on in your life?” and work its way into “what would you like to see happen as a result of your bankruptcy case?”

Together, you will work with your lawyer and staff to collect the necessary supporting documents (generally including  2 years of past tax returns, 6 months of bank statements, 6 months of paystubs for you and your spouse, and/or business profit-loss statements, business bank account statements, copies of title documents, lease contracts).  Usually, a proprietary bankruptcy credit report will be ordered that will include ordinary credit items that the major credit report agencies report on, plus any peculiar addresses your creditors use to receive notices related to bankruptcy.

Armed with these documents, your lawyer can begin the somewhat tedious task of preparing your bankruptcy petition, schedules, and statements that will cover such items as your assets, liabilities, income, expenses, and transfers.

Based on your financial goals and eligibility, generally, a decision will be made to proceed under Chapter 7 (“fresh start”) or Chapter 13 (“plan of reorganization”).  Even within Chapter 7, a determination will be made whether your case is a “consumer case” or a “non-consumer (or business-related) case.”  If more than fifty percent of your outstanding debts are consumer-related, you will have a consumer Chapter 7.  If more than fifty percent of your debts are non-consumer or business-related, you will have a non-consumer Chapter 7 case.  In making this determination, it is the purpose for which funds were spent and not simply the type of credit account that was opened.

Here’s an example: Walter White, chemistry teacher, opens an American Express Centurion Bank credit card account in the name of Walter White, utilizing his personal creditworthiness.  Walter initially intends to use the card to cover family meals, recreation, and some special needs of his only son.   After starting a new business called Heisenberg Productions, LLC, Walter draws on the AMEX credit line for $15,000 to fund the startup operations of his new car wash business.  The credit line is used to cover the initial payroll of several employees, supplies, equipment, first and last month’s rent plus two months’ security on a rental office.  Even though the AMEX card was a personal credit card, the debt will be categorized as non-consumer or business in Walter’s Chapter 7 bankruptcy case.

So what’s the whole broo-hah-hah over whether a Chapter 7 case is consumer or non-consumer? What’s the difference?  Well, there are a few biggies. 

Consumer debtors actually have different roadblocks and detours to navigate past than their non-consumer counterparts do.  Under current law implemented by The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (“BAPCPA”) consumer debtors that earn more than the median income level for their particular state, must qualify for Chapter 7 bankruptcy relief by passing “the means test.”

This is a somewhat out-of-touch analysis that lawyers (or pro se debtors) must in engage in that first calculates income using a “lookback” period of the trailing six months just prior to the prospective bankruptcy filing date, and then offsetting that income using a hodgepodge of sometimes the greater or lesser of actual expenses or IRS standardized tax deductions, to arrive at a fictional current monthly income (“CMI”) and disposable monthly income (“DMI”) that could be used to fund a hypothetical Chapter 13 bankruptcy case (the thrust of this “test” is to steer otherwise would-be chapter 7 filers looking for an immediate fresh start, into a protracted five-year period of repayment under Chapter 13). 

Does it sound confusing yet?  Yes? Perfect! Our government hard at work, doing what it regularly does to working middle-class America: leaving most of us scratching our heads.

If the results of this largely out-of-touch fictional analysis roughly yield a “surplus” of monthly income of about $220 or more, or about $13,000 over a 5-year term of repayment (based on a hypothetical Chapter 13 case), you will be “pushed” into Chapter 13 or face potential dismissal of your case for “abuse.” 

The actual threshold or abuse levels will vary from these figures based on how many “heads on beds” actually live within your household.  The figures used are just to give you a rough estimate.  Usually, if you’ve got a monthly surplus of more than a few hundred bucks you’re going to be pushed.    But wait, there’s more. 

Even if your fictitious monthly income surplus is a bit more modest, if it would result in you having a fictitious income surplus sufficient to repay 25% or more of your unsecured creditors over a 60-month surplus  period – you might not be “pushed” –  but you most certainly will be “firmly steered” in the direction of Chapter 13 or face dismissal of your case for “abuse.”   

You will generally survive “the Chapter 7 police” (The United States Trustee’s Office) if your fictitious monthly income surplus would result in repayment of less than 25% of your unsecured debt over the hypothetical 60-month period of Chapter 13, though you always have the choice to elect Chapter 13, provided you have a regular monthly income stream — if that’s your personal preference. 

The United States Trustee’s office usually wields its power and ability to cut you to the quick in Chapter 7, by relying upon 11 U.S.C. 707 (b)(1) and (2) (failing the means test as discussed above) and asserting your Chapter 7 bankruptcy case is an abuse of the process.  As if this potential minefield was not bad enough, even if you step lively, you must hope they don’t drop a 707(b)(3) bomb on you.  The (b)(3) bomb leveled against you will assert you either filed your case in “bad faith” or that the “totality of the circumstances” shows that your filing is an abuse.   

If you manage to avoid these minefields, congratulations! The rest of your journey might not feel like a walk in the park, but if you and your lawyer properly prepared your case, you should be well on your way to getting your fresh start – that is, provided you don’t trip up on any 11 US.C. 707(a) factors (discussed below).  Yes, Chapter 7 consumer filers are not only potentially within the clutches of a 707(b)(3) bomb, but they are always equally within range of receiving a fatal 707(a) knockout punch from a United States Trustee. 

The United States Trustee’s Office has no (b)(3) bombs to fire at you in a non-consumer Chapter 7 case, but that doesn’t make you quite bulletproof.  Under 11 U.S.C. 707(a) the U.S. Trustee can claim that your case should be dismissed (yes dismissed, not merely converted to Chapter 13“for cause including” — and the statute goes on to laundry-list 3 causes:  1. unreasonable delay that prejudices creditors;  2. nonpayment of required fees; and 3. failure to make certain required bankruptcy filings.   

You would be wise to make sure you don’t check any of those three boxes – anyone one of them can result in your Chapter 7 case being dismissed.  But alas, if only it was that simple.  The devil is always in the details and the “devil” in 707(a) is most certainly that innocent word “including” which sends a red-flare signal out to lawyers, judges, and United States Trustees that the 3-part laundry list of 707(a) was not intended to be all-inclusive – hence the use of the word “including.”  Might there be other factors that a U.S. Trustee could rely on? You betcha! 

You won’t find any other checkboxes in the statute, and this is simply another fine example of how judges are often forced to “legislate from the bench” to fill in gaps that our distinguished legislators – more often than not – intentionally leave open in the law.  Whether this is done to give the law increased flexibility, or because it was a late Friday afternoon and someone needed to beat the rush hour traffic to Martha’s Vinyard, certainly needn’t be decided here.

All you need to know is that even if you are a non-consumer debtor, you will need to concern yourself with the original 3-part laundry list cited above, and an additional 14 factors that courts have developed along the way – all to test your mettle – and all to potentially kick you out of bankruptcy court with a “707(a)  KO” – the “KO” here is not in the statute.  We are using it to stand for a knockout punch. 

Thankfully the factors are tempered and ordinarily violating one factor or even a few, might not necessarily knock you out of the Chapter 7 box.  Obviously, depending on the gravity of the factors,  the more factors you trigger, the more likely it is that you will be subjected to the U.S. Trustee’s left hook “707(a)  KO.”  

Here are the factors many courts will consider in evaluating the “totality of circumstances” – which can also constitute “for cause” under 707(a) –  and remember, your mileage may vary depending on your own locality: 

1. you reduced a multitude of creditors to culminate in just having a single creditor in the months prior to filing  2. you failed to make lifestyle adjustments  3. you filed in response to a judgment from litigation (note: people do this all the time)  4. you made no effort to repay your debts  5. a blatant “unfairness” in you utilizing Chapter 7

6. you have sufficient resources to pay your debts  7. you are paying “insiders” (family, friends, associates)  8. you inflated your expenses on your bankruptcy schedules  9. you transferred assets (before or during bankruptcy)  10. you are “over-utilizing” bankruptcy protection to an unconscionable detriment of creditors

11. you engaged in a deliberate pattern of evading a single major creditor  12. you failed to make truthful disclosure to the bankruptcy trustee and court  13. your debts are modest compared to assets and income and 14. you’re a serial bankruptcy filer.

The value of a good lawyer here cannot be overstated!   When you really think about it, most of the value of a good lawyer is not wrapped up in his/her time, it is wrapped up in his/her experience and knowledge. 

A good lawyer will discuss all of these factors with you to determine if you are reasonably clear, if you need to wait to file, or if you are willing to take a calculated risk based on the triggering of a few factors.   Good lawyering makes no guarantees, but it does tend to make accurate predictions and strives to avoid unnecessary surprises during your case. 

Your last step before filing is to make sure you have completed a “Budget and Credit Counseling Briefing” course from an approved provider sanctioned by the United States Department of Justice.  You can do this online and it shouldn’t take more than about 30 minutes to complete or cost more than about $25. 

In total there are 2 educational requirements: the briefing that you do before filing your case (the company will issue a certificate of completion) and then during your case, you will complete a more comprehensive “Debtor Education” course.  The burden time on the Debtor Education course should run maybe an hour or so, with emphasis on the “burden” of course.   Again, the fee should run about $25. 

 You can find a service provider through the U.S. Department of Justice website here  or head on over to which is a reputable company providing this service (sanctioned by the Dept. of Justice).  We have no affiliation with (Credit Card Management Company) other than the fact that we have been referring clients to them for over ten years, because they are reliable, professional, courteous, and quick.   They offer both online and telephonic options and their fees are in the average ranges described.

Step 2:  CASE FILING.  Clients often ask, “How long does it take to file my case?” and our answer is always the same: “it depends.”  Mostly on the circumstances. If your situation is a dire emergency, your case can usually be filed the same day.  Ordinarily, when you and your lawyer have fully developed your bankruptcy petition schedules and statements, after having discussed all of your unique issues, it is time to file your case and officially declare bankruptcy. 

This can take a matter of a few days, depending on how fast you return the required supporting documentation to your lawyer, or it could take a few weeks if you simply have competing time obligations.  A lot of the “how long it takes” depends on you.  It might also depend on circumstances.

Some clients have reasons why they might need to defer the filing of their cases.  Some because they had filed a previous Chapter 7 bankruptcy within 8 years and wanted to file another Chapter 7 case.  Others had to defer filing in order for their homestead exemption to fully mature.  Some because necessary medical expenditures were still being incurred and there was a risk that these expenses would be un-reimbursable by insurance. 

Yet, others had been repaying friends or relatives during the year (“priority transfers”) and needed a one-year window period to expire to avoid those friends and relatives being on the receiving end of a lawsuit by the bankruptcy trustee to recover those funds.   

All things being equal, if you are responsive to your lawyer in returning all requested documentation, the petition, schedules, and analysis are usually completed within a few days to a week, another few days to allow for your review and signature, and wallah!  Your case should be ready to be filed.   Today this is ordinarily done with a few magic keystrokes on a computer and using automated software, most lawyers can process the filing of your bankruptcy case in three to five minutes! 

Times have certainly changed from the old days of slaughtering innocent trees to make paper for 7 or 8 copies of an average 60-80 page bankruptcy petition, commuting over to the local bankruptcy courthouse during regular business hours, and waiting in a long line to have a clerk process the filing of the case.  Electronic filing today takes place 24 hours a day, 7 days a week, even on holidays with very rare downtime.    The ability to file cases with lightning speed has been a lifesaver for filers that needed emergency bankruptcy relief. 

There is a bit of a morbid analogy that can help you understand what happens the very moment you file for bankruptcy.  Is it as if you have serenely and peacefully floated over the effervescent Rainbow Bridge?  Perhaps you think of it as fearlessly (or fearfully) crossing over the Great Divide?  A modest walk through the Pearly Gates?  Maybe just the simple dissipation of your core being and essence into a vast bottomless continuum of time, space, and energy.   

However you personally choose to define it – wherever you actually go when you die,  picture having had the forethought to have left a Last Will and Testament in your wake (in reality you should have this anyway). 

The moment your file for bankruptcy, a bankruptcy estate is created and all your worldly possessions that are in existence up until that very moment of filing are identified, neatly cataloged, and included in your bankruptcy estate (with limited exceptions).  It is a financial “snapshot.”  A photograph of a single moment in time that will guide the trajectory for the rest of your bankruptcy case. 

Similar to the way an “Executor” or “Personal Administrator” (named in the Last Will) is appointed to manage and administer your probate estate assets according to the terms of your Last Will, so too, a trustee is appointed (by the court) to manage and administer your bankruptcy assets, pursuant to the laws and rules and caselaw that govern bankruptcy cases.

Savvy estate lawyers may figure out ways to avoid probate by having your assets pass by operation of law – outside of the probate estate.  Similarly, there are some assets that might wind up being excluded (“exempt”) from your bankruptcy estate.

That’s about where the similarities end and your life continues. That’s generally good news!  Don’t you agree?   Meaning, if your Uncle Jamie and Aunt Cersei decide to gift you a treasured sword made of Valyrian steel worth about $10,000, and they give it to you the day after you file for bankruptcy (which happens to be your birthday) – guess what?  It is NOT part of your bankruptcy estate. 

Winning the lottery for millions of dollars the day after you file for bankruptcy is a little trickier.  When did you buy the winning ticket? Before or after you filed for bankruptcy?  If before, then the winning ticket is part of your bankruptcy estate – it matters little that it has subsequently increased in value after the date of your bankruptcy filing. 

What if you purchased the winning ticket after you filed for bankruptcy?  You’ve got a “great argument” that because those winnings are not within the ambit of bankruptcy’s “180-day Rule” those winnings are not part of the bankruptcy estate and you should not be forced to share it or surrender it. The “180-day Rule” (11 U.S.C. 541(a)(5)) applies to inheritances, property settlements with a spouse, property divisions by a divorce decree, or a life insurance death benefit that is paid to you.

Even though you’ve got a “great argument,” watch out for that U.S. Trustee coming back into the ring about now!  Remember that great 707(a) left hook!?   (S)he’s been training for this very moment, and here’s the punch: 

even if the winnings are excluded from your bankruptcy estate, the totality of circumstances makes clear that your bankruptcy – originally filed in good faith with good need – has now become a perversion of the very pillars of equity intended to give those that fell on hard times a genuinely-needed “fresh start.”  You’ve won the lottery, for heaven’s sake! How much more of a fresh start do you really need???

And all you really need to know at this point is that your bankruptcy judge is likely to agree.  Case Dismissed!

But let’s face it – if you win the lottery for millions of dollars, that should be the worst of your problems in this life.  Moving on… 

Once your case is electronically processed the court will have automatically entered its “Order for Relief” which contains an “automatic stay” provision (“freeze” on most creditor activity).   Your case number, trustee, and judge are assigned, and several key dates are assigned as well, to control the tempo of your case.   In short, on the day you file, you learn the most critical (procedural) parameters of your case’s lifecycle.  The “who, what, when, and where” so to speak. 

You will know when your first (and hopefully only) hearing that you will be required to attend will take place.  You will know the time frame that creditors will have to object to your bankruptcy discharge or dischargeability (generally 60 days from the first date set for the Meeting of Creditors).  If all goes well, once that 60-day deadline expires and you have fulfilled all of your filing obligations, you can expect to receive your discharge order within a few days of that expiration date. 

Best practices for lawyers will be to file a “Suggestion of Bankruptcy” (i.e., a notice of bankruptcy filing) in each and every active litigation that you are involved in – even litigations that may have terminated in judgments that creditors are seeking to enforce against you.  These “Suggestions” are not required, they have no bearing on the power of the court’s automatic stay even over a creditor that might not be aware of it.  Eventually, if the creditor is listed in your case, the creditor will receive a notice via “snail mail ” from the bankruptcy clerk, but that may take a few days to a week.   

The best practice of filing the “Suggestion” is a practical one.  Like the bankruptcy filing itself, the “Suggestion” is filed electronically, but this time, into the state court case, and generally within minutes, it is circulated via email to all the interested parties in that action so that they become aware of the automatic stay prohibition.

Step 3: MEETING OF CREDITORS.  For you, the first important date will be your “Section 341 Meeting of Creditors” generally held within 20-40 days after the date of petition filing.  For now, these meetings are typically held telephonically so you can attend from the comfort of your own home or any place in the world where you have a good connection. 

This measure was implemented as a result of COVID-19 lockdowns, but it appears that the courts have come to appreciate that handling the Meeting of Creditors telephonically (or over Zoom if there are many creditors) is simply more time and cost-effective for everyone involved, than forcing a commute to the local courthouse. 

Whether this practice will ever revert back to the days of yesteryear (pre-COVID) with in-person meetings, remains to be seen.  For now, you can expect to dial into the Meeting on a number provided by the clerk’s office on its official  “Notice of Bankruptcy Case” which gets mailed out to all interested parties shortly after the filing of your case. 

Significantly this meeting takes place outside the presence of the judge presiding over your case.  This is not a trial, nor is formal evidence presented, although you will testify under oath under penalty of perjury. 

Clients are often surprised to learn that creditors rarely show up to the Meeting of Creditors in a garden variety consumer Chapter 7 case.  Most of your consumer creditors have been around the block.  Bankruptcy may be new to you, but certainly not to them.  For the most part, your bankruptcy – like all those that have come and gone before yours –  is factored in as just one of their many costs of doing business.   

Your consumer creditors know the statistics.  The odds are not in their favor.  Unless they have a strong case to claim that you committed fraud against them (good old-fashioned breach of contract is not enough) their debts will likely be discharged at the end of your case.  It is simply a matter of money.  Why throw good money after bad?  And this is why they usually do not show up to the Meeting of Creditors.

Ironically, of the rare times when creditors do show up to a consumer case, it is usually a disgruntled spouse who has a non-dischargeable claim of alimony or child support.  There is almost nothing you can do in the context of a Chapter 7 case to discharge such debts and therefore, even disgruntled spouses really have no incentive to appear and participate, and yet sometimes they do, if only just to listen in, and in lesser instances, to vent just a little bit.   

Even if your relationship with your ex-spouse is toxic, your interests here would be aligned since a discharge of your otherwise dischargeable debts would increase the likelihood or minimize any struggling you’ve been having in paying that child support and/or alimony.  No real reason to bite the hand that feeds you. 

“Well, if no creditors come to the Meeting of Creditors, what exactly happens there?”  You ask a very good question.  Remember, the bankruptcy trustee is appointed to represent your unsecured creditors in a general capacity,  irrespective of whether or not they participate in your case.  For the most part, the Meeting of Creditors will be a “Meeting with the Trustee.” 

Depending on your trustee’s caseload, mood, and particular style, you may be engaged in a little bit of harmless chit-chat intended to loosen you up.  It’s conducive to a good flow of information.  For the most part, however, it will be right down to the business at hand.  Also, with the disappearance of face-to-face meetings that took place pre-COVID, this brief and limited “seemingly social construct” has all but disappeared in the wake of faceless telephonic hearings.  It’s a very minor point, but one that has been observed, nonetheless.

Cattle calls are cattle calls.  Whether they take place in person, by telephone, or by Zoom meetings.  To be blunt, that is the look and feel of a Meeting of Creditors.  Trustees will run calendars throughout the day, generally starting at around 8:30 am up to around 4:30 pm on every half hour.  Thus, you may have a 9:00 am hearing scheduled along with five to 20 other consumer debtors, give or take half a dozen or so.   

Even though you’re scheduled for 9:00 am, you might not get heard until closer to 9:30? 10:00? 10:30 am?  Trustees try to run a tight ship, but sometimes the complexity of a case demands greater time than the usual five to ten minutes most cases occupy.    Plan on allocating an hour or two built around your scheduled time to be heard and you will likely be pleasantly surprised to be in and out within an hour. 

 It’s worth mentioning irrespective of the time, the experience is a whole lot less painful for debtors and their counsel since the meetings (at least for now) are telephonic.  Nothing stops you from multitasking until your case is called. 

You are certainly free to listen in on some of the preceding cases – although no two meetings are exactly alike, there are plenty of standardized questions the trustees use (your lawyer should have reviewed them with you prior to the Meeting) and this will be a good opportunity to get a sense of how your own examination might go. 

When your case is finally called, the trustee will verify your identity, and confirm that your address and social security number on your bankruptcy petition match the records supplied to the trustee (your lawyer will have already transmitted to the trustee many documents collected from you for the purpose of this meeting).  The trustee will have already reviewed your bankruptcy petition and schedules prior to the Meeting and will be referring to it in real-time as you are questioned under oath.   Some of the predictable questions you can expect to be asked:

 Did you ever file for bankruptcy before? What caused your bankruptcy filing or how did you get into financial trouble?   If you own real estate: Tell me about your home.  When did you buy it? For how much? Are you current on the mortgage? Do you intend to keep it?  If you sold your last home to buy your current home, how much did you net at the closing? What did you do with that money?  Where do you work? Does your spouse work? 

Did you list all of your assets and liabilities?  Tell me about Heisenberg Productions, LLC.  Did you own it yourself?  Is it still operating?  Does it still have a bank account?  If so, how much did it have on the day you filed for bankruptcy?  Why did you stop operating it?  What happened to the inventory, equipment and receivables?  Does anyone owe you any money? Were you involved in any “slip and falls” or other personal injury cases in the last few years or right now?  Have you transferred any assets within the last 4 years? 

Many of these questions will be based on the information you supplied in your bankruptcy schedules and statements.  The goal of the trustee in examining you and in reviewing your petition and schedules is to try to determine if there are any unprotected (unexempt) assets that could be sold for the benefit of your unsecured creditors. 

Those assets are not just limited to property in your physical possession but in your constructive possession as well.  Perhaps a third party is in possession of your property because you transferred it to them within a few years of your bankruptcy filing?  Perhaps you repaid family and friends within a year of your bankruptcy filing?  All of these avenues become potential pockets of revenue for a trustee to claw back funds into the bankruptcy estate for the benefit of your unsecured creditors.

When all is said and done, even the most vigilant of trustees cannot draw blood from a stone.  If the trustee completes his or her due diligence on you and makes the determination that you have completed your required filings, listed all of your assets and liabilities, and your assets are either all protected or of such inconsequential value that it would not warrant their administration through the court’s sale mechanism, the trustee will file a Report of No Distribution (“RND”) with the court.

The RND verifies the trustee has completed his/her due diligence and that the trustee’s examination is now complete.  It will verify there are no assets available for distribution, it may list any assets abandoned by the trustee back to you, and will generally contain a request by the trustee to be discharged as trustee, paving the way for you to get your own discharge – an order from the court discharging you from all dischargeable debts. 

If you make it past the trustee and that RND is filed, that is wonderful news for you.  You are not quite home-free, but you are getting mighty close to receiving your discharge order from the court.  You will wait out the sixty-day period to see if any of your creditors rear their ugly heads to file objections to your discharge.  Yes! Even creditors that don’t show up to the Meeting of Creditors can throw you this curve ball even if the trustee is completely finished with you. 

Objections to discharge must be pleaded in a separate case filed against you, known as an Adversary Proceeding (“AP”).   This is a legal proceeding, that proceeds separate and apart from your primary bankruptcy case.  It tends to be a rarity in garden-variety consumer cases, but they do occasionally pop up.  A creditor needs a really strong basis to file an AP against you.  Being angry at you for breaching your contract falls woefully short of the mark. 

It takes something far more dark and sinister to prevail with an AP.  Fraud or breach of fiduciary duty are two that come to mind.  There are others beyond the scope of this article. 

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Disclaimer: The Law Offices of Michael E. Zapin is a debt relief agency and we help our clients file for bankruptcy relief. The information on this website is for educational purposes only and should not be construed as legal advice.
Information discussed on this website is focused on bankruptcy in the State of Florida and may vary from state-to-state. Contact a local practitioner in your home state for more information on the differences or contact us for a reliable referral.