After a bankruptcy petition is filed with the clerk’s office, the automatic stay immediately takes effect and prohibits virtually all creditors from taking any collection action against the debtor or the debtor’s property. Although the stay is automatic, creditors need to be advised of the stay. The court issues a notice to all creditors advising them of the filing of the bankruptcy, the case number, the automatic stay, the name of the trustee assigned to the case (if filed under chapter 7, 12, 13, or subchapter V of chapter 11), the date set for the meeting of creditors, the deadline (if any) set for filing objections to the discharge of the debtor and/or the dischargeability of specified debts, and whether and where to file claims. The exact information in the notice depends on the chapter under which the case is filed.
A meeting of creditors is usually held within 25 to 40 days of filing if the debtor lives near Portland or Eugene, or within 25 to 60 days if the meeting is held in other areas of the state. At the meeting the debtor is required to respond under oath to questions from the case trustee and to any questions that creditors may have relating to the financial condition of the debtor and the debtor’s assets. Attending this meeting is mandatory for the debtor but creditors need not attend.
In a chapter 7 case involving an individual debtor, the creditors generally have 60 days from the first date set for the meeting of creditors to object to the discharge of all the debtor’s debts and/or the dischargeability of a specific debt. If the deadline passes without any objections to the debtor’s discharge of all debts being filed, the court will issue a discharge order. If any objections to the dischargeability of specific debts are filed, they will be heard by the court, but will not delay the granting of a discharge with respect to other debts. An objection to discharge or to the dischargeability of certain debts is considered a separate lawsuit (an adversary proceeding) within the bankruptcy case and may result in a trial before the judge assigned to the case. Chapter 7 corporate and partnership debtors do not receive discharges.
If there are no estate assets from which a dividend can be paid to the creditors, the trustee prepares a report of no distribution and the case is closed. If there are assets that are not exempt, funds are available for distribution. The court sets claims deadlines and notifies all creditors to file their proofs of claim. The trustee proceeds to collect the assets, liquidate them and distribute the proceeds to creditors. When the assets have been completely administered, the court closes the case.
In a chapter 13 case, creditors are given an opportunity to object to the plan. If no objection is filed by creditors or the trustee, the plan may be confirmed as filed. Once the plan is confirmed, the trustee will distribute the proceeds of the debtor’s plan payments to the creditors until the debtor completes the plan or the court dismisses or converts the case. Upon completion of the chapter 13 plan payments, the court issues a discharge order, the trustee prepares a final report, and the case is closed. If debtors are unable to complete the plan through no fault of their own, and request a “hardship discharge”, a discharge may be granted if certain criteria are met.
In a chapter 12 case, the confirmation hearing must be concluded within 45 days of filing the plan. The court may consider dismissal of the case if a plan is not confirmed. Once the plan is confirmed, the trustee disburses the payments received from the debtor and makes sure the farming operation is running according to plan. Upon completion of the chapter 12 plan payments, the court issues a discharge order, the trustee prepares a final report, and the case is closed. If debtors are unable to complete the plan through no fault of their own, and request a “hardship discharge”, a discharge may be granted if certain criteria are met.
In a chapter 11 case, the debtor meets with the U.S. Trustee’s staff before the creditors’ meeting. At the meeting, the U.S. Trustee reviews the responsibilities and restrictions of the debtor-in-possession, explains the quarterly fees and monthly operating reports, and generally discusses the financial situation of the debtor and the scope of the anticipated plan of reorganization. Interested unsecured creditors are encouraged by the U.S. Trustee to form a creditors’ committee and to take an active part in moving the case along. In most chapter 11 cases, a disclosure statement must be filed with the plan and approved by the court before votes for and against the plan can be solicited. After the estate has been fully administered, the court enters a final decree closing the case. A chapter 11 estate may be considered fully administered and closed before the payments required by the plan have been completed.