How Long Does Chapter 7 Bankruptcy Take?

Texas Debt Relief Attorney Explains the Process

Video Transcript:

David Shuster:

The people can't pay, they just can't pay the money, and there needs to be a way out... And that's what Chapter 7 is.

Rob Rosenthal:

Do you have any idea how long the Chapter 7 bankruptcy process takes? Well we're gonna find out for you right now, because that's what we're going to ask the lawyer. Hi again, everybody. I'm Rob Rosenthal with AskTheLawyers.com, and my guest is Dallas attorney, David Shuster. I wanna remind you right off the top, if you'd like to ask David questions about your situation, here's what you do, go to askthelawyers.com, click the button in the upper right hand corner that says Ask a Lawyer, and you can ask away right there. David as always, great to see you, thank you for helping us out.

David Shuster:

Yeah, likewise, Rob, thanks, good to see you.

Rob Rosenthal:

So we're gonna talk about Chapter 7 bankruptcy, let's just get the quick start off with a quick synopsis, tell us what Chapter 7 is and what makes it unique.

David Shuster:

A Chapter 7 is a great way to get rid of unsecured debt, if you have more debt than you can pay and you have assets that are exempted, you can keep under the law, you can essentially just get rid of all of your debt without losing anything. Think of it as business as usual, but without the debt, so it'll eliminate the debt because you can't pay it and allow you to move forward quickly.

Rob Rosenthal:

So how long of a process is this? Does it take a long time? What are we looking at?

David Shuster:

Rob, you know the interesting thing is the process takes longer just to get the information, to pay the attorney, make sure the client qualifies, all that stuff is done ahead of time, and so that can take longer, but if somebody shows up ready to file, we know they qualify and they deliver the information and pay the fee within a matter of days, we get the case filed once everybody has approved the information, and it only takes 90 days, and so essentially it's 90 days start to finish, you can be done and out of debt, it's a very quick process.

Rob Rosenthal:

And does the person involved need to be prepared to go to a hearing or even show up at a court house, anything like that?

David Shuster:

That's one of the biggest misconceptions, I think just with the general public, maybe if you've never thought about this before and you're wondering what bankruptcy is, that is one of the biggest and misconceptions is that you're gonna have to actually go through this arduous process where a decision maker, a judge is going to be deciding if this is gonna work, like, what's gonna happen? Am I gonna lose something? And I get actually, are all my debt's gonna go away, or just some of them? And they often assume that you're going to be going into a courtroom, and even if it's a virtual hearing, they assume that there will be some sort of judge involved in the process. Every case is assigned a judge, however, there is no court appearance, and 99% of the cases, it's a hearing with a trustee, and it involves a telephone call hearing at this point, believe it or not, Rob, it's really, really hands-off.

Rob Rosenthal:

And if you were my attorney for this, would you be on the phone with that on that telephone?

David Shuster:

Yes, yeah. And so the misconception is that, yeah, I'm gonna go before the judge is gonna decide if I'm good or bad, if my debts can go away, if they can't, and so, Yeah, circling back to that, that's pretty much determined ahead of time, because the law is relatively black and white on that, we'll know everything in advance what you can keep, what you can get rid of, that is all learned in advance with myself and the client, and so there is no real mystery about that. The purpose of the hearing, which I will be attending with my clients on the telephone, I'm on my own phone, they're on their own phone, and we unmute whenever our name is called, and we say some things to verify that my client is in fact the one on the line that I've met with them virtually or in person. You can go through this whole process without even leaving your house, we can do a video conference or a phone call, probably both at some point. The trustee hearing, which is before a trustee, not a judge, is entirely by telephone, and don't expect that to change any time in the immediate future.

Rob Rosenthal:

And so, yeah, we're basically both on the phone, answering questions, and then you hang up the phone when you're done, it's about a five-minute hearing all together, and... So what's hearing about? If they're not making a decision, it's essentially just confirmation that you filed this case that you listed all of the property that you own, that you swear, it's a hearing under oath, even though you're just on the telephone, Rob, they make you do an oath. And so it is to confirm that the information supplied is correct, and the trustee is just going to ask questions about things on the petition to determine if there is an asset that can be... That's coming in like the biggest example is a tax refund, if you file your case and you're entitled to a $5000 tax refund, sometimes you can keep it, sometimes you can't. Or if you filed your case and you had $7,000 in your bank account, and sometimes you can keep it, sometimes you can't... So the questions are just about that, my client, and myself have already talked about all of that ahead of time, so there is no "gotcha!" Really, at those hearings is just a short hearing to swear to all of the information.

Rob Rosenthal:

And then becomes the important process of rebuilding credit. David, how long should somebody expect that to take?

David Shuster:

Rob, right now it is very, very fast, and this is anecdotal evidence, mostly from my clients, I hear that they say that when the discharge goes through, they already have a 700 credit score again, back up from 500, so it's very quick. I always conservatively say that, give it a good six months to get a credit card right away, but give it a good six months or so to use and pay a card to show that you're a good credit risk again, but very quickly, which is another huge misconception that you're really the process of bankruptcy is... It's not bad. It's not bad to file, it's a good thing, to do for yourself and your family. And the misconception is that this is just a horrible thing, it's gonna ruin me, and that's way, way back in society, back in medieval times. This has always been a thing. Bankruptcy, okay. It's always been there, and what has faded away is making it something of embarrassment or making it something of, we're gonna punish you because you filed bankruptcy. We finally have figured out in society over the years that you have to forgive debts, okay. It's this small cost to the creditors of not getting paid back, that money is totally baked into their business model, it actually improves the economy and improves your family's situation, and you're not doing it just for fun because you have some cash over here and you don't wanna give it to creditors. Okay, all my case is really all of them, the people can't pay, they just can't pay the money and there needs to be a way out, and that's what Chapter 7 is.

Rob Rosenthal:

At what point in the process... And this may be hard for you to pin down, David, but at what point do they contact you? When they kinda see in the future, "Uh oh, I don't think I'm gonna be able to... I'm about to get under water or wait until I'm drowning." When should someone contact you?

David Shuster:

It's a great question. The answer is, it's never too soon. It's never too soon. Never too soon to contact an attorney to talk about it, if you have... If you're just kind of thinking, Jeez, there's a lot of debt here, and I'm not quite sure how in the end this is gonna work out, and look how much interest in paying every month. Again, the creditors have such a favor... The interest rates, the business model that they have is basically designed to be sure that they're gonna gain huge amounts of money from the purchase of a media room or whatever, some sort of... whatever they charge on the credit card is way more cost in the end, by the terms of the creditor has built into the system, so this is an opportunity just to get out of that and never too soon to contact an attorney, if you start looking at those terms, start looking at the balances you... I've had clients who have contacted me when everything is great, perfect credit score, everything's good, but they just... They say, Wait a second, I'm kind of over-leveraged here and I'm wondering if one thing went bad or if I started making a little less money, the economy goes down, I'm gonna be having a hard time of it because my situation dependent on everything getting better and better very quickly, so just talk to an attorney if you have any question about it. They're almost always free consultations in bankruptcy, you can almost always give really good information in a five to seven minute phone call.

Rob Rosenthal:

Really good information today as always, David, thank you so much for making some time to answer our questions. 

David Shuster:

Yeah, thanks Rob.

Rob Rosenthal:

That's gonna do it for this episode of Ask the Lawyer. My guess has been Dallas attorney David Shuster. Remember, if you want to be able to ask David questions about your situation, it's easy to do, go to askthelawyers.com, click the button in the upper right-hand corner that says, Ask a Lawyer, and you can ask away right there to walk you right through the process. Thanks for watching, I'm Rob Rosenthal with Ask the Lawyers.

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