While filing for bankruptcy can be a powerful tool for handling your debt, many individuals find it quite daunting. In order to determine your best course of action, it is essential that you stay well informed throughout the entire process.
Step 1: Know Your Status
The first important step for an individual who is filing for bankruptcy is to collect and get all of your personal financial information in order. This will include a list of all your secured and unsecured debts (you might find ordering your credit report helpful), tax returns for the last two years, deeds to any real estate you own, car titles, and any other loan documents you may have.
Step 2: Get Counseling
A person is required by federal law to seek consumer credit counseling from a counseling agency approved by the U.S. Trustee within six months of filing for bankruptcy protection. This is to ensure that the individual as explored all possible debt solutions before resorting to bankruptcy as the most suitable option.
Step 3: Select Your Option
The two most common bankruptcy types are Chapter 7 and Chapter 13. Chapter 7 bankruptcy involves the liquidation of your assets while Chapter 13 bankruptcy is a repayment plan. In order to be eligible for Chapter 7, a person must qualify via a means test. Talk to your attorney in order to determine the best choice for your situation.
Step 4: File Your Case
Once you have identified your most suitable bankruptcy option, official bankruptcy forms must be used to file and take action in bankruptcy cases. These forms, collectively referred to as the schedules, ask you to describe your current financial status and recent financial transactions (usually within the last two years). If you are filing a Chapter 13 bankruptcy, a proposed repayment plan must also be submitted with your petition. Once the bankruptcy petition is completed you will need to file the petition with your local United States bankruptcy court. The fee for filing a Chapter 7 bankruptcy is $200 and the fee for a chapter 13 bankruptcy is $185.
As soon as your case has been filed an "Automatic Stay" goes into effect and your creditors are required to stop hounding you.
Step 6: The Meeting of Creditors
Approximately one month after filing your petition, you will be contacted for a first meeting of creditors, often called a "341 meeting." The trustee assigned to the case presides and asks questions about the contents of the bankruptcy schedules. The debtor must appear at the meeting and answer questions under oath about his assets and liabilities. Most 341 meetings are very brief and uneventful; the debtor does not have to justify filing bankruptcy; no rights are won or lost at the 341 meeting. Creditors are invited to the meeting and are permitted to ask the debtor questions under oath, though in most cases creditors will not attend. If there are no challenges, you will receive a notice from the court, usually within four to six months, that the bankruptcy is discharged.
Step 7: Evaluating Your Assets
In a chapter 7 case, the trustee will determine whether or not there are assets that can be liquidated and used to repay your creditors. If the trustee determines that all your assets are exempt, a report of no distribution will be filed with the bankruptcy court. If the trustee determines that there are non-exempt assets, they will be sold and payments may be made to your creditors. In a chapter 7 case, you may never have to pay a creditor back. In a chapter 13, you will be required to enter into a 3 to 5 year plan, in which you will pay creditors as much as you can over time, taking into consideration the BAPCPA means test.
Step 8: Notice of Discharge
The 60th day after your meeting of creditors is the deadline for creditors to formally challenge the discharge of your debt. If no such lawsuits are filed, you will receive notification of a discharge of debt shortly after that 60th day you. A discharge signifies that you have no further obligation to repay the discharged debt and that your creditors can never collect the debt from you.
If you filed under Chapter 13, you will receive the notice of discharge approximately 30 to 60 days after your final payment has been made and the trustee ensures your payment plan has been followed and completed. Not all debt is discharged in a chapter 7 or 13 case, including student loans and certain taxes, so you may not be completely relieved of the obligation to repay all debt. Whether or not a debt is discharged depends upon certain Bankruptcy Code provisions, and with respect to some debts, whether or not a creditor succeeded in convincing a judge that your debt to that creditor should not be discharged.
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