Applying for bankruptcy can be a long process, but it doesn’t have to be difficult. The biggest part is just a matter of filling in the paperwork correctly and approaching things in the right order.
When a debtor tries to file for bankruptcy, his case is investigated by a government official called a trustee. The bankruptcy trustee is responsible for supervising the bankruptcy and settlement problems during the entire process.
Most petitioners mainly deal with the liquidator and do not currently have to appear in court except to confirm their debt settlement plan. A large part of the bankruptcy cases is usually handled by paperwork and looks more like an administrative process than a legal procedure.
Steps to file for bankruptcy
When you file for bankruptcy go to https://bankruptcy-basics.org/ â†’, you must take a number of steps to approve your petition:
1. Your financial inventory
The first step is to collect all your financial information. You need as much detailed information as possible about the following items. Please note that it may take some time to collect this information. If you are married, but your spouse does not file a joint bankruptcy with you, you also include his or her information.
- Debts. Include the creditor, the current balance, interest, your monthly payment, and other relevant information. Includes all debts, even the ones that you currently pay.
- Income Includes all money that you have received for any reason in the past six months, any money that you expect to receive in the future, how often you receive it and where it comes from. This includes your normal work income, unemployment compensation, income from side jobs, dividends or interest on investments, pensions and money contributed to the household by other people, such as your spouse or family members. However, you do not have to withhold income from social security.
- Assets and ownership. Include everything that you own that has value, such as shares, savings accounts, real estate, cars, collectibles, and art. Also include items such as clothing, home furnishings, and other personal smiley-rich possessions, especially if they are particularly valuable. PersooGeorge Smiley assets are generally considered “exempt,” that is, they will not be sold in Chapter 7 bankruptcy. However, what is considered an example in a state is not in another. It is, therefore, best to make an extensive list and ask the trustee or your lawyer what is considered exempt.
- Monthly household living expenses. Includes your costs for rent or mortgage, food, utilities, medical costs, clothing, taxes, transportation, child benefit, and alimony. When displaying variable expenses, such as utilities, provide an average based on the monthly invoices of the past year.
The administrator can request additional documentation to better understand or verify the amounts you claim. So while compiling this list, keep documentation handy and print all records.
Types of bankruptcies
When determining the type of bankruptcy to be filed, debtors must take into account their ability to pay their debts and whether they have assets that they would like to keep. A chapter 7 bankruptcy generally releases all debts, but also requires that most assets are liquidated to at least pay off some debts.
The debtor must also take a means test, which is conducted to exclude high income or a lot of assets from submitting chapter 7. It usually takes three to six months to fully process a chapter 7 bankruptcy and to release debts.
Persons who do not pass the means test can declare Chapter 13 bankruptcy, whereby certain debts are restructured and a payment plan is made. The petitioner then makes monthly payments to settle as many debts as possible with his current income.
Debtors are generally not forced to sell real estate in a Chapter 13 bankruptcy because the current income is used to pay off debts. Chapter 13 bankruptcy is usually closed after a payment plan of three or five years. Once the payment plan has been completed, all debts included therein are considered to be written off.
You must receive credit advice from an accredited agency for at least six months before submitting your petition. This type of counseling often takes just an hour or two, is often conducted by telephone or via the internet, and is usually less than $ 100 per session. If you do not provide credit advice, your application will not be accepted.
To get the most out of your counseling appointment, you must have your financial inventory ready before you leave. The credit consultancy will then help you determine which type of bankruptcy is most suitable and if you decide to submit Chapter 13, they will assist you with your payment plan. It is important to fully understand the payment plan, as the payments must start no later than 30 days after submitting your petition, even if the petition has not yet been accepted.
When you submit your petition, you must provide proof that you have received credit counseling. See this list of approved credit consultancy agencies for more information.
The meeting of creditors
After the bankruptcy petition has been filed and accepted, your creditors will receive a notification that you have included their debt in your petition. This letter also informs them about the automatic stay in your accounts (see below). About three to six weeks later, the trustee will hold a meeting for your creditors. During this meeting, also known as a 341 meeting, lenders can send a representative to question you or the trustee. While lenders are not required to participate, you are. If you are married, your partner must also be present, even if he or she is filing for bankruptcy or not at all. The examining magistrate will not be present. However, you will be sworn under oath to answer all questions correctly and to the best of our knowledge.
During this meeting, the bankruptcy trustee ensures that you are aware of the consequences of a declaration of bankruptcy and that you understand the effect of confirming a debt. You then confirm that you want to continue with the bankruptcy procedure. The confidant also uses this meeting to look for evidence of “abuse”.
Credit counseling after the bankruptcy
Once you have had your creditors’ meeting (chapter 7) or have almost made your last payment (chapter 13), you must undergo a course for credit circulation after the bankruptcy.
For Chapter 7 bankruptcies, this must be done within 45 days of the creditors’ meeting. For Chapter 13 bankruptcies, this must be done before the day on which you make your final payment or the day you submit a motion to settle the bankruptcy if you do not complete the payment plan.
If you do not send a confirmation to the liquidator that you have completed the post-bankruptcy counseling, you cannot complete the bankruptcy process and your debts will be discharged.
Additional considerations for bankruptcy
Bankruptcy and your spouse
Couples with financial problems may choose to register separately or file a bankruptcy case together. Many choose to go together simply because they do not have to pay two separate submission fees and also because spouses often sign each other’s loans.
So although it seems logical that one of the spouses will “fall into the trap” and claim bankruptcy, this is not an effective remedy if both spouses have signed on for loans.
File alone or with a lawyer?
Because bankruptcy is often complex, most people choose to use a lawyer. The average bankruptcy costs with a lawyer are between $ 1,000 and $ 2,500, depending on the complexity of the case. For obvious reasons, bankruptcy lawyers do not take credit cards. That is why it is important to consider bankruptcy before you are completely out of cash.
However, you are not required to have a lawyer, since most of the process is administrative. Bankruptcy generally costs between $ 300 and $ 500 depending on your region. You will find all necessary forms on the website of the US court.
Bumps in the process
If your bankruptcy application has been filed, it is not guaranteed that it will be approved or that all your debts will be permanently liquidated. Not only can your creditors object, but the court itself can also prevent debts from being canceled for various procedural or legal reasons. The court may also revoke a remission that has already been processed if there are reasons to believe that it should not have been processed in the first place.
Some of the problems that can plague a bankruptcy application are as follows:
- The court has evidence that the debtor has acted fraudulently or has committed perjury.
- The debtor fails to provide the required tax documentation.
- The debtor cannot record a loss of value in his assets.
- The debtor transfers or hides property with the intention of keeping it for creditors.
- The debtor deliberately destroys or hides documentation, paperwork or records.
- The debtor has acquired new property or other assets during the bankruptcy proceedings and has not been informed of the liquidator or court.
- The debtor was asked for an explanation, information or additional documents during an assessment or audit of his case and did not provide this.
- The debtor has not honored a legal order from the examining magistrate or trustee.
- The debtor does not complete a credit counseling program.
- The debtor does not complete his Chapter 13 payment plan in full or on time.
Also, a person cannot successively claim bankruptcy within a short time. However, the time between bankruptcies depends on the type of bankruptcy in each case.
- Between a fully dismissed chapter 7 bankruptcy and the filing of a second chapter 7 bankruptcy: at least eight years
- Between a fully dismissed Chapter 7 bankruptcy and the filing of a Chapter 13 bankruptcy: At least four years
- Between a fully discharged Chapter 13 bankruptcy and the filing of a second chapter 13 bankruptcy: at least two year.