STEP 1: Consult with an attorney and review your options
First, review your options with an attorney. Select an attorney with experience in bankruptcy matters. It is well worth the time to visit with a board certified bankruptcy attorney. Discuss the costs with your attorney. Develop a plan to pay the attorney and a budget to live by. You will want to get a “fresh start” so discuss that with your attorney. Finally, pay the fees necessary to file your case.
Do not rely on the Internet to obtain accurate information. No one polices the Internet to see if the information is accurate. At its best, the Internet may supply general background information that may be used for reference. At its worst, the Internet provides false, misleading and deceptive information.
STEP 2: Gather the information necessary to file for bankruptcy relief.
Second, if you decide that you are going to file bankruptcy, then your next step is to gather information about your assets and debts. Please obtain as much information as possible. Gather up all of your old and new bills, collection letters, invoices, debts, documents relating to loans and debts and all information that you have about your debts. Then make a list of all your assets with an estimate of fair market value of each item. If you are employed, then you are going to need the last 7 months of pay stubs from your job, and last year’s tax return. If you are married, then you will also need your spouse’s pay stubs, even if your spouse is not filing for bankruptcy relief.
STEP 3: Assist your attorney with the petition, schedules and statement of financial affairs
Your attorney will prepare a bankruptcy petition to file with the court. The petition states the type of bankruptcy that you wish to file, and it requests relief from the court. In addition, the attorney and you will prepare schedules of all of your assets, liabilities, income and other matters. In Chapter 13, a plan for repayment will be prepared. A statement of financial affairs will then be prepared as proof of your need for relief. The attorney will assist you in preparing the paperwork, but you will have to provide truthful and accurate information about all of your assets and debts, and answer all questions required by the Bankruptcy Court in a direct and forthright manner.
STEP 4: Preparing a Chapter 13 plan to repay your debts, if applicable
If you file for Chapter 7, this step does NOT apply to you. If you file a Chapter 13 to repay your creditors, then along with the assistance of your attorney, you will develop a Chapter 13 plan (plan of reorganization) to repay your debts. The plan is filed with the court at the time of the filing of your schedules, statements and financial affairs. The plan will propose to repay all of your priority claims such as taxes, child support and other priority debts and may include home mortgage arrearages, secured claims such as an automobile loan and may include repayment on all or a portion of your other unsecured obligations, such as credit card debts. The amount of the plan repayment is determined by your income and expenses and the requirements of the Code.
STEP 5: Attending the creditor’s meeting
You will be required to meet with a Bankruptcy Trustee (and any creditors who may wish to attend) in what is commonly called a “341 Meeting.” Any creditor who wishes to appear at the meeting may appear and ask you any question about your financial affairs and circumstances. The trustee will examine the petition, the statement of financial affairs and all or your schedules to determine if you own any non-exempt property that could be sold. In the event that you do not own any non-exempt property or in the event that the trustee considers the asset to be burdensome, then the trustee will either declare the case to be a no-asset case or abandon the burdensome asset and declare the case to be a no asset case. Please keep in mind that the final decision as to the exemptions on your assets (what you get to keep) may determined by the court and not by you or your attorney. Though rare, the trustee or the creditors may challenge your exemptions. The court will decide any exemption disputes.
In a Chapter 13 case, if you file one, then the trustee will meet with you and your attorney to review your Chapter 13 plan. The Trustee will also perform the same duties as a Chapter 7 Trustee, except that the Chapter 13 Trustee will not liquidate non-exempt property. The Chapter 13 trustee will verify the information that you have provided in the schedules and statement of financial affairs and will determine whether the plan accurately represents your ability to re-pay your net disposable income. The trustee will also determine whether the repayment schedule is reasonable and whether you can perform under the plan. Creditors are allowed to attend the meeting and ask any questions about your finances and your financial circumstances, including the feasibility of the plan, and the amount of the plan payment.
STEP 6: Confirmation hearing (only for Chapter 13)
After the repayment plan has been filed with the court, the creditors will receive a copy of the plan and have an opportunity to object to the plan. The court will set a date and hold a hearing to determine if the plan meets the requirements of the Bankruptcy Code and represents all of your net disposable income. If so, then the plan is confirmed.
STEP 7: Closure
In Chapter 7, the case is usually closed within 110 days. Once it is concluded, the debtor receives a discharge. It is likely that you will not have to return to the court after the initial 341 meeting. If no creditors object, then the Court will enter the discharge and if there are no assets to be administered, then the case is closed. If you are in Chapter 13, then the plan lasts for 3-5 years, and your case stays open for 3-5 years. If you complete your plan, then you receive a discharge at the end of the 3-5 year period. The Chapter 13 case is NOT closed until after you complete the plan and the discharge is entered.
Dana A. Ehrlich
Dana A. Ehrlich is a bankruptcy specialist who lives and works in San Angelo, Texas. He has lived in the Concho Valley and San Angelo, Tom Green County for many years. His practice is primarily consumer bankruptcy law and he is a board certified bankruptcy specialist for Chapter 7 and Chapter 13. He may be reached at 325-655-5351 or at firstname.lastname@example.org.