The Bankruptcy Process
INSIDER TIP: Use this diagram to follow along while you are reading.
Watch some introductory videos on the U.S. Courts website
Initial Consultation / Documentation
The first time you speak with your attorney, she will talk with you about your current situation and learn more about your concerns. Since each situation is unique, you will want to be as specific and detailed as possible during this conversation so she can help you choose the correct bankruptcy type and avoid surprises along the way.
Credit Counseling Course
The next step is a required credit counseling, or “debtor education,” course. Your attorney will help you find the right course to evaluate your situation, create a budget, manage your debt, and work with creditors.
Bankruptcy Filing
Once you complete the course, your attorney will help you give the court proof of completion and file for bankruptcy. Generally, this involves a large stack of documents to show the court your assets, liabilities, property, income, taxes, creditors, living expenses, and other financial statements. Both husbands and wives must send this information whether they are filing together or separately.
INSIDER TIP: Want a sneak-peek at the forms you are required to fill out? Click over to this U.S. Courts website.
The cost to file is $299, which includes a $245 case filing fee, a $39 miscellaneous administrative fee, and a $15 trustee surcharge. Any attorney’s fee is separate from the filing fee.
By now, all creditors have been stopped from calling or harassing you for repayment, which is enforced again by an “automatic stay” created upon filing. All contact will go through your attorney instead. The automatic stay will also stop foreclosure so you will have time to create a repayment plan before your house and other assets are taken out from under you.
Meeting with Creditors
Your trustee will hold a meeting for you and your creditors 20-40 days after you file. This meeting allows the creditors to ask you questions about your situation, and gives the trustee a chance to make sure you understand the consequences of bankruptcy. Your attorney will help you prepare for this meeting, so you will be much more at ease and have all the answers the trustee and creditors may ask for.
INSIDER TIP: Confused about the role of the trustee in a Chapter 7 or Chapter 13 bankruptcy? Learn why a trustee is like a good parent
Discharge
For Chapter 7 cases, the next step is simple. If everything goes well, the court will grant you a discharge, meaning you are not liable for your debts, and creditors are stopped from collecting or taking action against you. Certain debts that may not be forgiven are alimony, child support payments, student loans, and some taxes, among others.
In a Chapter 13 case, your attorney will help you create a plan after the meeting to spell out the terms of repaying your creditors, including the amount of a monthly or twice monthly payment you will give to your trustee to distribute the money. A Chapter 13 plan will last 3-5 years. Then you, along with your creditors and trustee, will attend a hearing to confirm your repayment plan. You will receive a discharge once you have successfully completed the plan.
The success rate of receiving a discharge with an attorney’s help is 99%, a number we found right on the US Courts website. The most common reason for the court denying you a discharge is providing incorrect information about your finances and your situation. Being completely honest and open will give you the best chance for success.
Bankruptcy filing is a straightforward process, but the details can be tricky. Courts can be unforgiving or seem unfair. The rules are always changing. Once you have jumped in, it gets harder and harder to fix mistakes and easier to fall into common traps to dig yourself out.
To help you avoid them, here is a list of the biggest mistakes you can make before filing. They will save you headaches, but they may also save your future.
Now that you have a good sense of the process and what is involved, you may be wondering how filing will protect your most important assets and property. I’ll tell you how to save your home in Issue 4 of The Smart Guide to Getting Out of Debt.
See you then!
-----
Do you have questions about this information?
Call Attorney Kathleen Kane at 888-7 NEW START (888-763-9782).
Ready to talk about your situation?
Call us now or schedule a consultation online. It’s free and there’s no obligation!
Not on our list yet?
Subscribe now to receive all 10 issues of our email guide and learn whether a short sale, loan modification, or bankruptcy could help you get out of debt.
