The Bankruptcy Process
The process of filing bankruptcy takes on average about 90 days for a Chapter 7 and 3 – 5 years for a chapter 13 and involves the following steps:
Meeting With Your Attorney
When you have your initial meeting with your attorney come prepared to disclose all your assets and liabilities. It is important to list all your property and debt so your attorney can determine if Chapter 7 is a feasible course of action. Full disclosure will also help your attorney determine what debts can be eliminated, which debts cannot be eliminated and which debts may be questionable.
It is a crime not to disclose all assets and you may lose your right to declare bankruptcy and be subject to prosecution for bankruptcy crimes.
By properly disclosing everything to your attorney, you will get a true picture of what you can keep and not keep through a bankruptcy case. If you fail to list a creditor, that creditor may still be able to collect on the debt after your bankruptcy is over and any property that is not claimed as exempt can be seized at a later date to pay the creditors.
Before You File
You must stop using all credit cards and don’t accumulate any further credit or take any cash advances. Any recent purchases or cash advances may be subject to an adversarial complaint from the creditor and you may still be required to pay this after your bankruptcy case.
Take the Required Credit Counseling
Before filing a Chapter 7 Bankruptcy you must fulfill the credit counseling requirement from an approved credit counseling agency. Credit counseling can be done on the internet or over the telephone. It normally takes anywhere from 45 to 90 minutes and costs between $15.00 and $45.00. This requirement must be completed within 180 days prior to filing bankruptcy.
File Your Taxes
You must provide your most recent year’s taxes to your attorney when filing for Chapter 7 bankruptcy. All personal income tax returns must be filed prior to chapter 13 filing. A copy of the return will be forwarded to your assigned bankruptcy trustee after your case is filed.
Provide Your Most Recent Pay Stubs
You must provide the prior six months paycheck stubs while your case is being prepared. These will be filed with the clerk of the bankruptcy court. If you receive income from a source other than employment, evidence of that income must be provided just as if a paycheck stub. Once you are aware that you are likely going to file bankruptcy, keep copies all of your paycheck stubs in an organized manner.
Compile Your Paperwork
Once you know that you are going to file bankruptcy, start saving all correspondence from creditors, collection agencies or others who are trying to collect on a debt. It may be wise to obtain copies of your most recent credit reports from TransUnion, Equifax and Experian and provide them to your attorney to be sure you are covering all debts including those you might have forgotten or which may be unknown. You are entitled to receive your credit report once per year at no cost through www.annualcreditreport.com.
Collect all statements from bill collectors. Get complete addresses of all creditors. Check the balances at financial institutions where you bank. Compile your recent tax returns to provide your gross income over the past three years. Write down your assets and liabilities in an orderly manner to help your attorney to prepare your case. Gather a listing of all your debts.
Take the time to be sure you are gathering absolutely everything that a creditor may try to collect on in the future and forward it to your attorney.
Your Bankruptcy Petition
Your attorney will prepare your bankruptcy petition and schedules primarily based upon the information and disclosures that you have provided. The petition and schedules will then need to be reviewed and signed by you. Take the time to be thorough in your examination of these documents to verify that the information is true and correct to the best of your knowledge and that all of your assets and liabilities are listed. Cross check the itemized list of creditors on your petition with the original list you prepared to be sure nothing has been left out.
For detailed information on the bankruptcy petition schedules go here.
Pay your attorney or make payment arrangements
Most attorneys will want to be paid in full before they file your case to avoid the risk of their fees being discharged in the bankruptcy. All attorneys’ fees come under the scrutiny of the United State’s Trustee’s office and the bankruptcy court judges.
Stopping Harassment, Lawsuits and Garnishments
As soon as your bankruptcy case is filed, an automatic stay is enacted. An automatic stay prevents creditors from taking certain collection actions against you. These collection actions include:
- Telephoning you at home, work or on your cell phone;
- Filing lawsuits against you or continuing with lawsuits that are already in process;
- Repossession attempts;
- Foreclosure proceedings;
- Wage or bank garnishments;
- Recording any liens or judgments;
- Anything that attempts to collect a debt or improve a creditor’s position as it relates to a debtor and the underlying debt.
Exceptions to the Automatic Stay
There are exceptions to the automatic stay, especially in the case of re-filings.
Creditor actions are not stayed in the following circumstances:
- Criminal actions. Filing a bankruptcy will not prevent federal, state or local authorities from pursuing their criminal action against you.
- Lawsuits involving child support or spousal support are not stayed and can be pursued despite your bankruptcy filing.
- Actions by governmental units to enforce a police power are not stayed.
- Eviction cases where the landlord has already obtained a judgment prior to filing or if the eviction is based on endangerment of the rental property or an illegal use of controlled substances is occurring on the premises and the eviction started prior to the bankruptcy case being filed.
- In the case of a second filing within a year of a prior filing you will only get a 30 day stay in which time you would have to prove to the court that the filing was in good faith.
- In the case of a third filing of bankruptcy within a year of a prior filing you would not get a stay unless once again you can prove to the court that you are filing in good faith.
Your Bankruptcy Estate
Upon filing, all of the property you own becomes part of your bankruptcy estate. Every possible interest (contingent, partial, legal or equitable) goes into the bankruptcy estate. Although there are exemptions which allow you to keep all or a portion of your assets, the property is still technically considered property of the estate.
Most assets acquired after the bankruptcy filing will remain your property. However, if you inherit money or property within six months after your case is filed or, receive a marital property settlement from a pre-bankruptcy divorce then that property may become property of the estate..
The 341 Meeting of Creditors
Shortly after your bankruptcy case is filed, the clerk of the US Bankruptcy Court will send notice of your filing to all parties and creditors listed on your bankruptcy petition. The clerk will also assign a bankruptcy trustee and set a date for your 341 meeting of creditors.
The meeting is required in the bankruptcy code to examine the debtor under oath with regard to the information contained in your schedules in order for you to be eligible to receive a discharge. It also gives creditors an opportunity to ask questions with regard to the information listed in his petition and schedules. Finally It allows the trustee to take sworn testimony from the debtor with regard to the information contained in the petition and schedules. A trustee will ask additional questions with regard to the assets, liabilities, income, expenses and statement of financial affairs of the debtor.
Personal Financial Management Class
After your case is filed but prior to discharge, a second class is required. The class is called a personal financial management class or a debtor education class. You may receive solicitations from companies offering this class in the mail or you may chose to use the company with whom you completed your first class; any company is fine so long as they are authorized in the Eastern District of Washington to provide personal financial management classes.
The Discharge Order
After your case is filed and prior to your discharge order being entered, creditors have an opportunity to object. If there are no objections to your bankruptcy discharge within a reasonable time set by the bankruptcy clerk, the discharge order will be entered and mailed to all parties, creditors and the attorney for debtor.
Entering of the discharge order is the final process that will occur in your bankruptcy case. This means that creditors can no longer object to your discharge.
Now that you have received your bankruptcy discharge your mailbox will likely be flooded by new credit offers, offers to finance vehicles and more. This is your opportunity for a fresh start but do take care in building new credit in a responsible way. Learn more about life after bankruptcy and buying a home after bankruptcy.