Upon filing the original petition with the Clerk’s Office, the court’s restraining order, called 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, or 13), 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 differs depending on the chapter under which the case is filed.
A meeting of creditors will usually be held within 20 to 40 days of filing unless the debtor lives in an outlying area, then it may be a little longer. The meetings set for Portland and Eugene will be held at the office of the U.S. Trustee. 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 the 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 and may result in a trial before the judge assigned to the case. Corporate and partnership chapter 7 debtors do not receive discharges. If there are no estate assets from which a dividend can be paid to the creditors, the trustee will prepare a report of no distribution and the case will be closed. If there are assets that are not exempt, funds will be available for distribution. The court will set claims deadlines and notify all creditors to file their proofs of claim. The trustee will proceed to collect the assets, liquidate them and distribute the proceeds to creditors. When the assets have been completely administered, the court will close 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, the court will issue a Discharge Order, the trustee will prepare a Final Report and the case will be closed. If the debtor is unable to complete the plan through no fault of his/her own, and requests a “hardship discharge”, if certain requirements are met, a discharge may be granted.
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, the court will issue a Discharge Order, the trustee will prepare a Final Report and the case will be closed. If the debtor is unable to complete the plan through no fault of his/her own, and requests a “hardship discharge”, if certain requirements are met, a discharge may be granted.
In a chapter 11 case, the debtor will meet with the U.S. Trustee’s staff before the creditors’ meeting. At the meeting, the U.S. Trustee will go over the responsibilities and restrictions of the debtor-in-possession, explain the quarterly fees and monthly operating reports, and generally discuss 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. 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.