Bankruptcy is divided in several clear stages. At each of these stages, there are different requirements from you and from your attorney. If everything goes as planned, these are the most likely stages you will face:
The first stage of bankruptcy involves the gathering of your financial information. You will have to do this yourself because most institutions will not release this information to anyone except the account holder. Also, some of these requirements may vary depending on which chapter you are filing under. Here is a list of the information you will need:
2. Petition Preparation
The second stage of bankruptcy involves preparing the petition. Once you have gathered all of the information, your attorney will prepare the petition by entering the information into the schedules and forms which together comprise the bankruptcy petition.
During this stage your attorney will order a copy of your credit report to ensure that all of the debts in your name are listed. This will not cost you anything if you have retained my office to represent you.
You will also have to complete the first education class called “Credit Counseling.” I recommend the course provided by www.hummingbird.org. This will also not cost you anything if you have retained my office to represent you.
3. Sign-off and Filing
The third stage of the bankruptcy process is where you review the petition. In this stage you will need to carefully read the petition to ensure it is accurate. Remember, this is your petition and your case, and you are responsible for ensuring it is completely accurate. Once the review is complete, you will need to sign and date the forms in multiple locations. Once it has been signed, your attorney will file it electronically through the Court’s Electronic Filing System (ECF).
Once the case is filed, you will have to complete a second education class called “Financial Management”. Again, I recommend the course provided by www.hummingbird.org. This will also not cost you anything if you have retained my office to represent you.
If you are filing under Chapter 13, then the monthly trustee payments start immediately after filing. Also, if you intend to keep a car or a house, then payments on the loan for these items must continue to be made after filing the petition. If you fall behind on these payments, the creditors will get permission from the Court to foreclose on the house or repossess the car.
4. Meeting of Creditors
The next stage is what is called the “Meeting of Creditors” or 341 Hearing, which refers to the section of the Bankruptcy Code which requires this meeting. In a typical bankruptcy case, you will not appear in Court and will not see the Judge unless an objection is raised in the case. Usually, the only formal proceeding at which you must appear is the meeting of creditors, which is usually held at the offices of the U.S. trustee.
You must have a current photo ID and social security card with you at the hearing.
This hearing is usually three to four weeks after the petition is filed. It is conducted by a Trustee, not the Judge, and you will be under oath. The Trustee will ask you a series of questions to ensure the petition is accurate and truthful. If there are any problems, the Trustee will ask you about them at this hearing.
Creditors can also ask you questions at this hearing if they chose to. It is unusual for creditors to show up at this hearing, but it does happen. They can ask questions regarding the debts you owe to them and you will be required to answer truthfully.
Following the 341 hearing, there will be a series of procedural steps depending on which chapter you have filed under. Most of these will be handled by your attorney and do not require anything further from you.
In a Chapter 7 case, there will be a report from the trustee to the Judge recommending discharge of your debts. After reviewing the Trustee report, the Judge will issue a discharge order. This usually takes place a three to four weeks after the Meeting of Creditors.
If you are filing under Chapter 13, there will be a confirmation hearing about three to four weeks after the Meeting of Creditors. This hearing is where the trustee makes a recommendation to the Judge whether the Chapter 13 plan will work or not. If there are problems the confirmation will be delayed until they are resolved.
Once the case is confirmed, you will need to make all of the Trustee payments for the full duration of the plan, which can be up to five years long. Only after all payments are completed will you receive a discharge order from the Judge.
What is Bankruptcy?
Bankruptcy is a process in which consumers and businesses can eliminate or repay some or all of their debts under the protection of the federal bankruptcy court. For the most part, bankruptcies can be divided into two types -- liquidation and reorganization.
Chapter 7 bankruptcy comes under the liquidation category. It's called liquidation because the bankruptcy trustee may take and sell ("liquidate") some of your property to pay back some of your debt. However, you may keep property that is protected (also called "exempt") under state law. There are several types of reorganization bankruptcies, but Chapter 13 is the most common type for consumers. In Chapter 13 bankruptcy, you keep all of your property, but must make monthly payments over three to five years to repay all or some of your debt.
Both Chapter 7 and Chapter 13 bankruptcy have many rules -- and exceptions to those rules -- regarding which debts are covered, who can file, and what property you can and cannot keep.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy can be filed by individuals (called a "consumer" Chapter 7 bankruptcy) or businesses (called a "business" Chapter 7 bankruptcy). A Chapter 7 bankruptcy typically lasts three to six months.
Property liquidation. In Chapter 7 bankruptcy, some of your property may be sold to pay down your debt. In return, most or all of your unsecured debts (that is, debts for which collateral has not been pledged) will be erased. You get to keep any property that is classified as exempt under the state or federal laws available to you (such as your clothes, car, and household furnishings). Many debtors who file for Chapter 7 bankruptcy are pleased to learn that all of their property is exempt.
Secured debt. If you owe money on a secured debt (for example, a car loan for which the car is pledged as a guarantee of payment), you have a choice of allowing the creditor to repossess the property; continuing your payments on the property under the contract (if the lender agrees); or paying the creditor a lump sum amount equal to the current replacement value of the property. Some types of secured debts can be eliminated in Chapter 7 bankruptcy.
Eligibility for Chapter 7. Not everyone can file for Chapter 7 bankruptcy. For example, if your disposable income is sufficient to fund a Chapter 13 repayment plan -- after subtracting certain allowed expenses and monthly payments for certain debts -- you won't be allowed to use Chapter 7 bankruptcy.
Bankruptcy doesn't work on some kinds of debts. Though bankruptcy can eliminate many kinds of debts, such as credit card debt, medical bills, and unsecured loans, there are many types of debts, including child support and spousal support obligations and most tax debts, that cannot be wiped out in bankruptcy.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy is also known as "wage earner" bankruptcy because, in order to file for Chapter 13, you must have a reliable source of income that you can use to repay some portion of your debt.
Repayment. When you file for Chapter 13 bankruptcy, you must propose a repayment plan that details how you are going to pay back your debts over the next three to five years. The minimum amount you'll have to repay depends on how much you earn, how much you owe, and how much your unsecured creditors would have received if you'd filed for Chapter 7 bankruptcy.
Debt limits. Your debts must be within limits set by the federal government: Currently, you may not have more than $1,010, 650 in secured debt and $336,900 in unsecured debt.
Secured debts. If you have secured debts, Chapter 13 gives you an option to make up missed payments to avoid repossession or foreclosure. You can include these past due amounts in your repayment plan and make them up over time.
Other Types of Reorganization Bankruptcy
In addition to Chapter 13 bankruptcy, there are two other types of reorganization bankruptcy: Chapter 11 and Chapter 12.
Chapter 11 bankruptcy. Chapter 11 is typically used by financially struggling businesses to reorganize their affairs. It is also available to individuals, but because Chapter 11 bankruptcy is expensive and time-consuming, it is generally used only by those whose debts exceed the Chapter 13 bankruptcy limits (rare) or who own substantial nonexempt assets (such as several pieces of real estate). If you are considering Chapter 11 bankruptcy, you'll need to talk to a lawyer.
Chapter 12 bankruptcy. Chapter 12 is almost identical to Chapter 13 bankruptcy. But to be eligible for Chapter 12 bankruptcy, at least 80% of your debts must arise from the operation of a family farm. Chapter 12 bankruptcy has higher debt ceilings to accommodate the large debts that may come with operating a farm, and it offers the debtor more power to eliminate certain types of liens. Very few people use Chapter 12 bankruptcy; if you want to join their ranks, you should consult with a lawyer.