Major Steps in the
Bankruptcy Process
1
Understand your financial objectives and legal alternatives.
In addition to bankruptcy services, we also provide foreclosure defense, creditor negotiations/settlements and loan modification services). A great first step of all Steps in the Bankruptcy Process is to understand the pros and cons of your legal alternatives in order to choose the path that makes the most sense for you. Call us today for a free attorney phone consultation.
2
Determine which chapter of the bankruptcy code will best serve your interest and help you achieve your financial objectives.
Individuals filed the most common bankruptcies which are Chapter 7 and Chapter 13. Whereas Chapter 11 is typically filed by businesses (or individuals that are over the Chapter 13 debt limits). Call us today to learn more about which bankruptcy option makes the most sense for you given your specific objectives. Moreover, to simply gain a better understanding of your legal alternatives and what bankruptcy can and cannot do for you. To gain the most insight, it is always helpful to have some basic documents together. For instance, like recent paystubs, tax returns and monthly bills.
3
Take the bankruptcy “Means Test”.
This is one of the most important of all Steps in Bankruptcy Process. The means test is a fairly complex formula that is outlined in the bankruptcy code as a method to determine the amount of your disposable income. Preparing an official bankruptcy form helps in determining results of the bankruptcy means test. This form is very similar for both Chapter 7 and Chapter 13 bankruptcy. In the end, the results of the means test will determine your eligibility for a Chapter 7 bankruptcy, your “disposable income” in a Chapter 13 bankruptcy and the minimum plan period of your Chapter 13 plan (typically, three to five years).
4
Complete the required Pre-Filing Credit Counseling Course
through an approved agency (take online or via phone). Once you decide to take advantage of the legal remedies available to you under the bankruptcy code, you must complete the first required educational course often referred to as “credit counseling”. The course can be taken online, over the phone or in person, and there are a large number of providers from which to choose. Once you have completed the course, you must obtain your Certificate of Completion. This certificate is required in order to file for bankruptcy and is valid for 180 days. This means you must file your bankruptcy case within 180 days of receiving your credit counseling certificate. You must retake the course if certificate is older than 180 days at the time you are ready to file. Therefore, it is best to wait until you are ready to file before taking the credit counseling course.
5
Prepare all required documents,
which of course our firm will handle on your behalf. Our internal process begins with a review of your personal documents like pay stubs, bank statements, tax returns, credit card bills and the like. Once we have the essential documents for review, we will be better prepared to discuss the details of your case, answer all of your tough questions. Once you are ready to file for bankruptcy, we will prepare the official bankruptcy documents for your review and approval.
These include the following:
- Bankruptcy Petition with Exhibits;
- Bankruptcy Schedules (Schedules A through G)
- Statement of Social Security Number(s)
- Statement of Financial Affairs
- Application to waive the filing fee or pay in installments, as applicable
- Statement of Intention, as required
- Statement of Current Monthly Income and Means Test Calculation, as required
- Disclosure of attorneys fees paid and promised
6
Approve the Bankruptcy Petition, Schedules and Statements, and File the Bankruptcy
Once you have thoroughly reviewed all of the required bankruptcy documents that we prepare for you, and all of your documents appear accurate and complete, they are then ready to file with the bankruptcy court. Filing the approved documents will begin your bankruptcy case, generate a bankruptcy case number and initiate the “automatic stay”. questions are answered and the information included a
7
Attend the “Meeting of Creditors”
This takes place between 20 and 40 days after you file for bankruptcy, and of course we will be there right by your side. Don’t worry, creditors rarely show up and the meetings are typically limited to an appointed trustee who will ask you some basic questions regarding the information contained in the documents we prepare and file for you. Of course, we will discuss your particular case with you prior to the meeting so that you are well prepared and there are no surprises. The meeting takes place under oath and is designed to give the trustee (and any creditors that attend) a better understanding of your assets, liabilities and financial history. This is the seventh step included in Steps in Bankruptcy Process.
8
Complete the required Post-Filing Financial Management course.
This is a second course that must be completed no later than 60 days after your Meeting of Creditors and prior to obtaining the court-ordered discharge of your debts. Although the course can technically be taken prior to filing for bankruptcy, we typically recommend that our clients take it after the case is filed. This avoids confusion and overload, and allows our clients to stay focused on what is most important during pre-bankruptcy preparation. That said, the agencies that offer the required pre-filing course mentioned above (i.e., the pre-filing “credit counseling” course) typically offer both courses and offer special discounts if both are purchased at the same time (but both courses do not need to be taken at the same time).
9
Attend the Discharge Hearing
as required. Again, if a discharge hearing is required, we will be there with you at your side.
10
Receive your court-ordered discharge.
(i.e., a mandated, tax-free forgiveness of your debt). This is the formal order issued by the bankruptcy court hat orders the discharge of your debts. Although most debts are dischargeable, some debts are excepted from discharge, such as most student loans and domestic support obligations. Your Order of Discharge permanently stops your creditors from trying collecting to collect on the debts that were discharged in your bankruptcy.
11
Peace of Mind
Once you receive your Order of Discharge, it is time to start rebuilding your financial future. This is the last of all Steps in Bankruptcy Process. It has been our experience that credit scores actually rise significantly after one obtains a bankruptcy discharge. The debt-to-income ratios are no longer preclusive and you are in a better position to manage your income and expenses. While a bankruptcy filing can remain on your credit report for seven to ten years, most lenders have a much shorter time requirement when considering an applicant with a prior bankruptcy filing.
For example, FHA guidelines only require a two year wait after a Chapter 7 discharge, and the timeframe can even be reduced to just 12 months if you can show that the Chapter 7 bankruptcy was caused by circumstances beyond your control. The FHA guidelines related to Chapter 13 bankruptcy require only one year of timely Chapter 13 plan payments. Bankruptcy truly does provide the opportunity for a fresh financial start.
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