What Happens at a Bankruptcy Creditor Hearing?

Bankruptcy law permits a debtor to make a clean start because an Order of Discharge issued by the court frees him from any liability for certain kinds of debts. This order forbids creditors to continue or initiate collection procedures, including communications and legal actions against the debtor who has filed for bankruptcy.

There are two common kinds of bankruptcy that can be filed by an individual. In a Chapter 7 bankruptcy, the trustee that is appointed by the court sells the non-exempt assets of the debtor and distributes the proceeds to the creditors. The exempt property will remain in the possession of the debtor. In this kind of bankruptcy, the debtor files a petition and various documents indicating his financial situation, assets and liabilities.

The bankruptcy creditor hearing is usually scheduled within 20 to 40 days after the filing of the petition. The trustee who has been appointed by the court will place the debtor under oath and both the creditors and the trustee may ask questions regarding his assets, debts and financial affairs. Bankruptcy judges are not allowed at the creditor hearing to ensure their impartiality. After the creditor hearing, the bankruptcy court will usually issue an Order of Discharge within 60 to 75 days.

Another common type of bankruptcy is the Chapter 13 in which the debtor promises to repay his debts within a period of three to five years. The debtor has to file his proposed repayment plan within 15 days after the petition was filed. The installments are usually made monthly or biweekly. The role of the bankruptcy trustee is to distribute the regular payments to the various creditors depending on the type of their claims. A creditor hearing will also be held in the same manner as in Chapter 7. The bankruptcy judge will then hold a hearing within 45 days after the creditor hearing to determine whether the proposed repayment plan is acceptable. The debtor may file an adjusted plan if the court refuses to confirm it. If the court confirms the plan, both creditor and debtor will be bound by it.

Because of several changes that have been made in the Bankruptcy Code, it would be advisable for a debtor to consult a competent lawyer when planning to file for bankruptcy protection.