Making the decision to file for bankruptcy can be daunting. Once you decide that bankruptcy is the right choice for you make sure that you understand the process from start to finish.
When filing for bankruptcy, there are a number of steps to take in order for your petition to be approved:
1. Your Financial Inventory
The first step is to assemble all of your financial information. You need to make a list of all your debt and all sources of income. If you are married, but your spouse is not jointly filing bankruptcy with you, include his or her information as well because the court wants to know about HOUSEHOLD income and expenses. Sometimes non-filing spouses freak out when they are asked for their information but without it, their partner will not be able to complete their case.
- Debts. Include the creditor, the current balance, the interest rate, your monthly payment, and any other relevant information.
- Income. Include any money you have received for any reason in the past six months, any money you expect to receive in the future, how often you receive this money, and where the money is coming from. This includes your regular working income, unemployment compensation, income from side jobs, dividends or interest from investments, pensions, and money contributed to the household by other people, such as your spouse or family members.
- Assets and Property. Include anything you own that has value, such as stocks, savings accounts, real estate, cars, collectibles, and art. Also list items like clothes, home furnishings, and other personal possessions, especially if they’re particularly valuable.
- Monthly Household Living Expenses. Include your costs for rent or mortgage, food, utilities, medical expenses, clothing, taxes, transportation, child support, and alimony. When listing variable expenses, such as utilities, calculate an average based on the past year’s monthly bills. While the court realizes that these expenses can change, you need to provide an average estimate.
Keep in mind that the trustee is 100% within their right to request proof of income and expenses so make sure you can verify the amounts you claim.
2. Credit Counseling
In order for your case to be accepted by the court you MUST complete your pre-bankruptcy credit counseling course BEFORE your case is filed. A date stamped certificate will be issued upon completion of this course (which you can do online or over the phone) which your attorney will need to file with the court. If you have any questions about this course we have a more detailed video about this process: The Pre Bankruptcy Credit Counseling Course.
3. The Creditors’ Meeting
After the bankruptcy petition has been filed and accepted, your creditors receive a notice that you have included their debt in your petition. This letter also notifies them of the automatic stay on your accounts. Approximately 30-45 days after your filing date, the court will schedule a meeting for your creditors. At this meeting, also known as a 341 meeting of creditors, creditors can send a representative to question you or the trustee. While creditors are not required to attend, you are. Please note that this hearing is NOT in a courtroom or in front of judge. The hearing will be held in a conference room. Most of the time, creditors do not appear at this hearing but if they wish to they can. You will be sworn under oath to answer all questions correctly and to the best of your knowledge so make sure you are 100% truthful in all of your answers.
During this meeting, the trustee will make sure you are aware of the consequences of declaring bankruptcy and that you understand the effect of reaffirming a debt. You will then confirm that you wish to move forward with the bankruptcy proceeding. For a list of questions that may be asked at the hearing please click on this article: Chapter 7 341 Meeting of Creditors Hearing Questions
If you a filing a Chapter 13 case then please click on the following article for a list of questions that my be asked by the Chapter 13 Trustee: Chapter 13 341 Meeting of Creditors Hearing Questions
The Automatic Stay
Once you have filed your bankruptcy petition, the automatic stay (11 U.S.C. Section 362) prohibits your creditors from contacting on your debts. Any attempt to do so after your case has been filed is a violation and sanctions can be imposed.
After the 341 Meeting of Creditors
Once your creditors have had a chance to question you and review your payment plan, they can either submit a formal objection or do nothing. If they choose to submit an objection, they generally have 60 to 90 days to do so from the time of the meeting.
In a Chapter 7 bankruptcy, the next step is that the trustee will review your assets to see if any unprotected assets can be liquidated to pay your creditors. Make sure you have reviewed your bankruptcy exemptions with your attorney to confirm which assets are or are not protected. Typically, most cases do NOT have assets to liquidate. Once the trustee determines that there are or are not assets to distribute, a report will be issued to clear the way for the discharge.
In a Chapter 13 bankruptcy, there are almost ALWAYS objections in a case. You will have another 30 days to review these objections with your attorney and make sure they are resolved before your next hearing. If you have made all your trustee payments and these objections have been resolve then your case will generally be approved by the judge at a confirmation hearing. Once your payment plan is confirmed as approved, you will continue to make your payments directly to the trustee on a monthly basis. The trustee will then pay your creditors for you. After completing the payment plan, the judge will issue a discharge order for any remaining debt.
4. Post-Bankruptcy Credit Counseling and 1328 Certificate (Chapter 13 Cases Only)
Once you have had either your creditors meeting (Chapter 7) or are close to making your last payment (Chapter 13), you will need to undergo a post-bankruptcy credit counseling course.
For Chapter 7 bankruptcies, this must happen within 45 days of the creditors meeting. In our district, the Northern District of Georgia, as long as this is filed before your discharge date then your case will discharge with no problems. For Chapter 13 bankruptcies, this must happen before the day you make your last payment or the day you file a motion to discharge the bankruptcy if you won’t be finishing the payment plan. In addition to the post-bankruptcy credit counseling course being filed in your case, you must also file the 1328 certificate (which will be sent to you upon the completion of your payments) with the court. Failure to do so will result in your case closes out WITHOUT a discharge.