THE BANKRUPTCY PROCESSSo just how difficult is it for a person to file Bankruptcy? While the process is by no means "quick and simple", there is most definitely a clear set of steps that must be followed to make it through the process, and these steps can be handled by most people with a bit of perseverance. The Bankruptcy process isn't "quick and simple" by design -- the filer is asking the Court to wipe clean the debts he or she said would be paid, credit that in most cases was extended in good faith. The elimination of these debts by the Court can cause significant financial damage to the person(s) or entities owed money. As such, the Court should make the process a challenge. Below is a general outline of the steps and procedures required in most bankruptcy cases. In many situations, additional administrative steps may be required.
STEP 1 - Determine which chapter of the bankruptcy you, the debtor, can useThe first step in the Bankruptcy process is to determine which type of filing should be made: Chapter 13 or Chapter 7. The provisions of chapter 13 have advantages to some persons who are considering bankruptcy. For example, the debtor has more equity in a home than can be protected with the exemption for real estate in a chapter 7 case -- the use of the chapter 13 case could allow the debtor to keep the home. Certain debts which are not dischargeable in chapter 7, such as those based on fraud, may be discharged if the debtor successfully completes a chapter 13 plan. Those who do not qualify for filing chapter 7 as a result of income in excess of that permitted by the "means test" will be required to file a Chapter 13 case Chapter 7 is often appropriate for those whose houses and cars payments are current, in which there is little or no equity in these assets, and there is no money left from the debtor's monthly paycheck to pay the debtor's bills (such as credit cards and signature loans). Chapter 7 allows the debtor a fresh start -- often while keeping most or all of their property.
STEP 2 - After determining the proper chapter you will be filing, follow these steps:
A. Mandatory Credit Counseling
You, the debtor, must obtain a certificate from an approved credit counseling agency before you can file your bankruptcy case. This counseling can often be done over the internet and will likely cost approximately $20-50. We recommend DebtorCC as they only charge $9.95. A copy of any payment plan devised by the counseling service (if any) must also be filed with the court.
B. File Petition, Schedules, & Statement of Financial Affairs with the Court
You must gather up all of the bills and documents showing what you owe. Then, you should determine the value of all of your assets (car titles, titles or deeds to homes, bank statements, etc.). Next, you will work with Express Bankruptcy Help Center to prepare and file the required forms with the bankruptcy court. Immediately upon filing your case, an injunction goes into effect stopping the creditors from taking any further action to collect or recover on any debt you have. This injunction is called the "automatic stay". Prior to filing, you should review the bankruptcy website for the court in which you will file your case. Review the local rules and procedures, etc. The court's website contains important information that will assist you in filing your case and will make your case proceed smoothly through the court system. Express Bankruptcy Help Center will also provide you with a checklist that has been compiled from the information on the court's website. This checklist will help guide you through the remaining process. The key in any bankruptcy case is listing all of your assets and all your liabilities. You should be clear and concise when providing the required information for your bankruptcy petition documents. Also, you should ensure that all creditors are listed on the documents filed with the court and that correct account numbers and addresses are listed for each creditor. Failure to comply with the filing requirements or missing deadlines may result in your case being dismissed and loss of bankruptcy protection.
C. Mandatory meeting with the Trustee
This meeting occurs 30 to 45 days after your case is filed. It is often referred to as the section "341(a) Meeting." It is a relatively simple meeting and usually lasts less than 10 minutes or less. The Trustee is an independent person appointed automatically in all chapter 7 cases by the United States Trustee's Office. The Trustee's role is to sell and turn into cash any non-exempt assets you have. The Trustee then pays those funds to the creditors according to their statutory priority in the bankruptcy code. The Trustee can also object to the granting of discharge in your case if he/she believes your case was not filed in good faith (such as having too much excess income to file a chapter 7) or if you have committed fraud in connection with your bankruptcy petition and schedules. Curious as to what questions you may be asked at the meeting? Click here
D. Time for Objections by Creditors and Trustee
The creditors have 60 days after the date first set for your meeting with the Trustee to file a complaint objecting to the discharge of their debt, or to your entire discharge. Grounds for doing this include fraud (such as incurring charges on a credit card that you did not intend or have the reasonable ability to repay at the time they were made), false statements on a credit application, fraud while acting in a fiduciary capacity, willful or malicious injury to a person or property of a person, and certain others, etc.. The Trustee has until 30 days after the date first set for your meeting with him/her to file an objection to any exemptions you have claimed. Again, this is rare, but it can happen depending on the specific exemptions in your case. It is important to correctly list your exemptions on your petition. Exemptions can be further explained on the LegalConsumer.com website
E. Financial Management Course
You are required to complete a financial management course before receiving the discharge. In chapter 7 cases, you must complete this course and file a certificate of completion with the court no later than 45 days after the date of your meeting with the Trustee. Again, this course is usually available via the internet or by telephone. We recommend DebtorCC as they only charge $9.95. If you fail to take this course, you will NOT get a discharge from the court.
If no creditor (or the Trustee) objects to your discharge within the time periods referenced above, and you have completed all of the other requirements imposed upon you, the bankruptcy court will issue a Notice of Discharge. This notice makes it "official" that your debts have been discharged or erased (except those that are not dischargeable -- like child support, alimony, certain taxes, student loans, and some others). The discharge applies to all dischargeable debts that were listed on your bankruptcy petition and schedules. We make the process simple and affordable. Contact us today for a free consultation.
NEED YOUR CREDIT REPORT?You have the right to a free credit report from AnnualCreditReport.com or 877-322-8228, the ONLY authorized source under federal law. Take me to the authorized source
LINKS TO BANKRUPTCY EDUCATION COURSES:Click here for the Pre-Bankruptcy Credit Counseling Course Click here for the Pre-Discharge Financial Management Course
* Fees vary slightly by state & district