Bankruptcy can seem like a complicated process and while the Federal Bankruptcy Rules are confusing and perplexing, the process doesn't have to be.
First, you have to decide what chapter to file. Most people file chapter 7 so this discussion will focus solely on chapter 7 bankruptcy.
Step 1: Document Collection
Next, you'll need to collect your documents. Here is what you'll need:
- Last two year's tax returns (if you were not required to file taxes this does not apply).
- 6 months of bank statements for all bank accounts your name is on (even if your spouse is not filing or if your name is on your kids' account or your parents' accounts).
- 6 months proof of income (paystubs, social security benefit letter, disability benefit letter, profit and loss statement broken down for each individual month for self-employed people).
- List of Assets (IRAs, 401k, real property, houses, cars, RVs, trailers, jewelry, guns, boats, collectibles, etc.).
- List of Creditors (we recommend you get a free credit report using annualcreditreport.com, this is the government free website for getting credit reports from all three credit bureaus every 12 months).
Step 2: Credit Counseling Course
Then you'll take the online Credit Counseling Class. This usually takes less than 30 minutes to complete and the price is between $10 and $25 depending on the company you use.
Step 3: Preparing the Paperwork
Next, we prepare the schedules and petition for you, which is the paperwork that will be filed with the court. It will list all your income and assets, as well as set forth your budget and list all of your creditors, among other things. Once it is filed a notice is sent to all of your creditors that are listed in the schedules and petition that you have filed bankruptcy. Once your creditors receive this notice, they are prohibited from calling, emailing, mailing you notices, filing or proceeding with lawsuits, garnishing your wages, etc. This is what is called the Automatic Stay Protection provided by the bankruptcy rules. It keeps creditors from harassing you while you're in bankruptcy.
Step 4: 341 Meeting of Creditors Hearing
Approximately 30 days after filing your bankruptcy the court schedules what is called a 341 Meeting of Creditors. Don' worry, in less than .01% of cases do creditors ever appear at this hearing. This is however a time that can be extremely stressful for people. We understanding that you're not used to going to the court house. It is stressful. You have to find and pay for parking. You have to go through security at the court house and show your ID to an armed federal marshal. You have no idea what to expect once you get inside. Your anxiety level is through the roof. We totally get it. But I am here you tell you unless you've totally lied to us about your income and budget or you're hiding property or assets, there is nothing to worry about. The trustees are normal people, just like you and me and they are only looking for assets in your case or to see if you're abusing the bankruptcy system. Because that is not you, you have nothing to worry about. In most of our cases, the interview lasts about 90 seconds!!!! Here is an example of the most common questions:
- Did you read and review the paperwork that was filed in your case?
- Is everything in the paperwork true and accurate?
- Did you list all of your assets?
- Did you list everyone you owe money to?
- Do you have a right to sue anyone for a personal injury case or car accident?
- Does anyone owe you any money?
- Is anyone holding on to property for you?
- Have you given, sold or transferred any property to anyone in the last year?
- Have you paid any one unsecured creditor more than $600 in the last 90 days?
- Why are you filing for bankruptcy?
Most people are surprised by just how easy and simple the 341 Meeting really is.
Step 5: The Discharge
Assuming everything goes ok to this point, which it almost certainly always does in my cases, all you have to do is take a second online course called a Personal Financial Management Class, which costs about $15-$35 depending on the company you use, then you wait 60 days after the 341 Meeting to receive what is called a “Discharge.” The Discharge is the most important part of the bankruptcy. This is what gets rid of all the debts. It cannot be issued any less than 60 days from the 341 Meeting because your creditors have 60 days to object to your discharge. Just like the 341 Meeting, less than 0.01% of creditors ever object to a discharge.
***As is the case with most things, there are a lot of details that are not included in this article. None of this is intended to constitute legal advice and nothing contained herein shall create a lawyer-client relationship. It is best to speak with an attorney to go over your specific case. Call or fill out a contact form on our website to schedule a free in office or over the phone consultation. We look forward to helping you get a fresh start and making the process as easy as possible.