Considering filing for bankruptcy? The procedure is a multi-step process that the bankruptcy court requires before a discharge from bankruptcy can occur. Although there are several types of bankruptcy, to keep it simple, we will only cover chapter 7 and chapter 13 here. The requirements for chapter 7 are a little easier to complete than chapter 13, but the steps are similar. The following procedure must be completed before a discharge in bankruptcy can be granted.
Steps in the bankruptcy filing process
1. Mandatory credit counseling course
Within 6 months of filing for bankruptcy, the debtor must complete an approved credit counseling course. The course has to be approved by the U.S Trustee's Office. The purpose behind the course is for debtors to understand whether or not they really should file for bankruptcy and why.
2. File the bankruptcy petition and related paperwork
- Chapter 7 filers need to fill out the forms and supply detailed income and expense information to see if they can pass the “means test”. The means test determines whether their income is low enough for them to qualify for chapter 7 bankruptcy. Once all paperwork is completed, a “stay” goes into effect, preventing most collections actions against them.
- Chapter 13 filers also need to fill out forms, some of which require the filer to document their property owned, debts owed, and financial information. Then a chapter 13 repayment plan must be submitted which meets all legal requirements. The bankruptcy papers, current tax return, and proof of the last four years of filed tax returns must be documented.
3. Court-appointed trustee
The bankruptcy trustee reviews all of the paperwork to make sure it complies with bankruptcy law.
- Chapter 7: The trustee takes non-exempt property for distribution to creditors.
- Chapter 13: The trustee collects payments for distribution to creditors and monitors monthly income and expenses, etc. The automatic “stay” goes into effect and creditors are notified, which prevents most creditors from trying to collect money owed.
4. Meeting of creditors
At the meeting of the creditors, the bankruptcy trustee and any creditors who choose to attend can ask questions concerning the bankruptcy, papers filed, and finances. In a Chapter 13 filing, creditors are allowed to contest the bankruptcy plan.
5. Confirmation hearing
Chapter 7 filers aren't required to attend a confirmation hearing. Chapter 13 filers find out if any of their creditors or the trustee have any objections to the bankruptcy plan. If there are no objections, this is when the court can approve the plan.
6. Non-exempt property, secured debts, filing or objection to proof of claims, compliance, and payments
- Chapter 7
a. Non-exempt property: If the debtor has any, the trustee has the right to seize, sell, and distribute the proceeds to creditors
b. Secured debts: If debtors have secured debts, backed by collateral, that the creditor has a right to take in case of default, debtors must give it back, redeem it, or reaffirm the debt.
- Chapter 13
a. Filing or objection to proof of claims: Creditors file proof in order to be paid. The debtor can object to the claim.
b. Compliance and payments: Debtors must make all payments when due, and submit any required documents when necessary.
7. Financial management course
Between the time of bankruptcy filing and closing of the case, the debtor must complete an approved financial management course. The purpose of the course is to make sure that post-bankruptcy, debtors know how to prudently manage money and utilize credit.
8. Discharge and close of the case
After the terms of the bankruptcy have been met, the court will grant discharge and the case will be closed.
If you file for bankruptcy, you want the experience to go as smooth as possible. When you hire an attorney to handle your bankruptcy case, you want to be represented by someone whose staff has the knowledge and expertise necessary to successfully discharge or reorganize your debts. At Robert H. Solomon, PC, Attorneys at Law, we understand bankruptcy law and how to make it work for you.