Notification

• When a bankruptcy petition is filed, all creditors must be notified. The bankruptcy court then issues a stay, meaning that creditors who are notified must immediately halt collection efforts, including letters and phone calls, and then must file their claims in order to secure repayment, if possible, from the debtor.
  
  

Proof of Claim

• Creditors then file a Proof of Claim form, which petitions the court to recognize the outstanding debts of the party that filed for bankruptcy. They must present proof of the claim, in the form of loan agreements, invoices, statements, and any other documentation of the debt, and they must file the Proof of Claim before the deadline fixed by the court. If the debtor is filing a Chapter 7 individual bankruptcy, he is petitioning to court to discharge any debts that are legally dischargeable. In a Chapter 13, the debtor petitions to have the court draw up a repayment plan. In a Chapter 11 business bankruptcy, the court places the company under the control of a trustee, who oversees the repayment of debtors according to the outstanding assets and liabilities of the company.
  
  

Priority and Non-Priority Claims

• The court establishes priority and non-priority claims. Priority claims include the cost of administration of the case (court fees, etc.), unpaid salaries and wages, child and spousal support and taxes. All priority claims must be paid on a pro rata basis before any non-priority secured and unsecured claims are paid. Secured claims are paid by liquidating the property that secures the debt; non-priority unsecured claims (credit cards, for example) are paid last.
  
  

Creditor Meetings

• At a meeting of the creditors, the creditors may appear to discuss the case and petition the court for action on the debt. Creditors may contest a debtor's attempt to discharge or cancel a debt, for example. In a Chapter 7, certain debts cannot be discharged, including child support arrearages, back taxes, debts arising from fraudulent acts, and civil and criminal fines. Creditors may also question the debtor about his financial condition, assets, income and resources, in order to establish that the creditor has the ability to repay debts.
  
  

Disposition

• After this meeting is held, the court determines how the debts are to be disposed of, drawing up a reorganization plan for the business or a repayment plan for an individual. If the debtor does not meet the legal obligations of the bankruptcy process, the court may dismiss the case, meaning the stay is lifted and creditors again have the right to pursue repayment of all debts, in full.