What Will Happen in Bankruptcy Court?

It's not surprising that many people worry that they might be treated harshly by a bankruptcy judge if they file for bankruptcy. Not only can admitting to financial issues be embarrassing, but most people are intimidated by going to court. If this is true for you, you might be comforted to know the chances are you'll never have to testify in a courtroom before a bankruptcy judge. If you do, you'll find the judge, court personnel, and most likely even your creditors to be professional and polite.

What You Can Expect

Even though most individual filers never go before the judge, all filers must attend one official meeting (more below). Beyond that meeting, you'll only have to testify in court if certain issues come up in your case, and many of these matters get resolved before a trip to the courthouse is necessary.

Hearings in Chapter 7 bankruptcy cases are relatively rare. Most cases are straightforward and take about four to six months to complete. By contrast, Chapter 13 bankruptcy cases are more involved, require that the court approve a repayment plan, and last from three to five years. Many things can—and do—happen during the period.

Here are some of the matters that might require a court hearing.

• Meeting of creditors. When you file a Chapter 7 or a Chapter 13 bankruptcy, the court assigns a trustee to administer your case. About a month after filing, you'll meet with the trustee (or a staff member). The trustee uses the meeting to clarify information disclosed in the bankruptcy paperwork you filed with your case. The meeting of creditors usually lasts about ten minutes, and while creditors can attend, they rarely do. (Learn more in What Is a Bankruptcy Meeting of Creditors?)

• Motion to extend the automatic stay. If you're filing a new case shortly after the court dismissed a prior case, you'll need to motion (ask) the court to extend the automatic stay—the order that prevents creditors from collecting from you—beyond the initial 30 days. The judge will want you to explain why the court dismissed your prior case, what circumstances have changed between the old case and the new one, what you hope the bankruptcy will accomplish, and how you intend to ensure that the new case will be a success.

• Confirmation of your Chapter 13 plan. The bankruptcy judge must approve any repayment plan you propose. If the plan is in order, the judge will approve it on the recommendation of the trustee. But issues can crop up. You'll have to show that you can afford the payments and that you're paying all your disposable income into the plan. If there's any question about that, you may have to appear at a confirmation hearing and give testimony to support your plan.

• Motion to lift the automatic stay. The automatic stay prevents a creditor from taking collection action during your bankruptcy case. If you have a secured debt like a car loan or mortgage loan, you must continue making payments on that loan during your bankruptcy if you want to keep the property serving as collateral. If you stop paying, the creditor has the right to repossess or foreclose on the collateral after getting permission from the court. The creditor makes the request by filing a motion to lift the automatic stay. If you oppose the motion, you might have to testify before the judge to show how you'll be able to make the payments in the future.

• Motion to dismiss your case. If you miss your plan payments in a Chapter 13 case, the trustee might file a motion to dismiss your matter. You could explain to the judge why you got behind with your payments and how you plan to avoid that in the future.

• Motion to approve additional debt. As a rule, you can't take on additional debt when you're in a Chapter 13 case. Considering the three- to five-year length of a Chapter 13 plan, it's not unusual for cars to break down, and other emergencies too. Some Chapter 13 debtors also take advantage of mortgage modification programs. Some judges must approve such motions at a hearing. Other judges give the Chapter 13 trustee the authority to approve a request for new debt.

• Adversary proceedings. You, the trustee, or a creditor could have reason to file an adversary proceeding (lawsuit) in the bankruptcy case. Two of the most common suit types in a consumer (non-business) case challenge either your right to a general discharge or the dischargeability of a particular debt. Just like lawsuits filed in other civil courts, the participants conduct discovery, argue motions, and try the case before the judge, if it gets that far.

Meeting With an Attorney

Most bankruptcy cases proceed straightforwardly without the need for court appearances other than the meeting of creditors. But that's not always what happens. A simple way to learn what to expect in your bankruptcy is to consult with a knowledgeable bankruptcy lawyer. After reviewing your case, the lawyer will likely be able to predict the course of your matter with a high degree of accuracy.