14 Steps to Filing Chapter 7 Bankruptcy

1. Analyzing Your Debt

During your initial consultation, the attorney will review your situation, including the types of debts you owe. Some debts, such as child support, student loans, and recent tax debt, are not dischargeable in a Chapter 7 bankruptcy. If you have property that you’ve put up as collateral for a loan, such as a car or a home, the creditor can take the property if you’re not current when you file and if you don’t remain current after your case.

2. Filling Out Forms

You’ll complete a few dozen pages of forms where you’ll inform the court about all your property, debts, income, expenses, and prior transactions. You’ll:

• list the names of all your creditors, property, and income
• decide what you want to do about each of your secured debts
• disclose property transactions that occurred up to ten years before your case

3. Verification

You’ll need to provide documentation that proves the accuracy of the information you gave in your bankruptcy forms. This will include bank statements, paycheck stubs, profit and loss statements, tax returns, and any other documents the trustee requires.

4. Eligibility

Most people will need to pass the means test in order to qualify for a discharge in Chapter 7 bankruptcy. Excluded individuals are those with primarily business debt and some military personnel.

To qualify your average gross income during the six months before you file must be equal to or less than the median income for a family of your size in Washington state. If not, you’ll subtract allowed expenses from your income to determine whether or not you’ll be allowed to use Chapter 7 bankruptcy.

5. Property Exemptions

Every state has exemption laws, which dictate what types of property you’re entitled to keep. In some states like Washington State, you can use the Federal Exemptions or the State Exemptions to protect your real and personal property. Usually, your attorney decides which body of law to use to best protect your assets. They both have their advantages and disadvantages.

Under Washington state law, homeowners may exempt up to $125,000 of their home or other property covered by the homestead exemption. If you’re not living in the home, you must file a homestead declaration. You can also protect up to $15,000 of unimproved property, but first, you must file a homestead declaration.

Most people can retain household furnishings, retirement accounts, a modest car, and some equity in a home. You’ll want to be sure you can protect everything you want to keep before filing.

6. Mandatory Credit Counseling

All individuals who file for bankruptcy must complete a credit counseling course by an approved agency within 180 days prior to filing for bankruptcy.  This counseling will help you to determine if bankruptcy is an appropriate option, and which one is right for you.

7. Payment of Filing Fee

A filing fee is required when you file your forms. When you file for bankruptcy, you must pay a filing fee to the Clerk of the Court. Filing fees can increase at any time, but currently are $335.00 for a chapter 7 and $310.00 for chapter 13.

You can apply to have the Judge waive the filing fee if your household income is 150 percent of the federal poverty guidelines or less, and you don’t have sufficient income to pay in installments. We usually recommend to our clients to not apply for fee waiver unless they have very dire circumstances since the application is reviewed strictly.

8. Filing Your Chapter 7 Petition

The Petition and Schedules are the detailed facts about you and your property. Filing your petition, which includes the main bankruptcy form, schedules, and other forms,  is the official start of your case. Typically all forms are filed at once, but if you’re pressed for time, you can opt for an emergency filing by completing a few required forms. The remaining forms must be filed within 14 days.

9. Secured Debts

When you file your bankruptcy forms you’ll include a form in which you state how you intend to handle any secured debts. Before your case is closed, you’ll need to follow through with your bankruptcy reaffirmation intentions.

For example, if you indicated that you’d return a car, you’ll want to be sure to make it available to the lender. It’s recommended that vehicles being surrendered to the creditor be returned to the creditors or be made available to the creditors to pick up within 45 days of filing of the bankruptcy. All reaffirmation agreements on secured debts must be filed before the discharge of your case.

10. Redeem, Reaffirm or Surrender

If you have property as collateral for a loan, you’ll need to continue to pay the creditor if you want to keep the property. Some examples of these are homes and cars, which most people keep through bankruptcy. Luxury items like boats, trailers, ATV’s are difficult to keep in most chapter 7 bankruptcies. When you file for bankruptcy, you’ll be asked to decide whether you want to:

1. redeem the property—pay the creditor the current replacement value of the property in a lump sum
2. reaffirm the debt—agree to continue paying per the contract with the creditor (usually under the same terms)
3. surrender the property—let the creditor take it

11. Creditors Meeting

The creditors meeting, known as a 341 hearing, will require you to go to court. In most cases, you’ll only need to appear in court once for a short meeting with the trustee. Though it’s very unusual for creditors to appear, there is always the possibility that one or two may show up as well, but this rarely happens. The bankruptcy trustee appointed to your case will:

• check your identification
• ask standard questions required of all debtors
• ask specific questions about the information in your forms

** Until October 10, 2020, all creditors meetings will be held telephonically due to COVID19. To learn more read our article on Filing for Bankruptcy During COVID-19

12. Filing Objections or Motions

If you have a dispute with a creditor’s claim against you or you want to eliminate certain liens, you’ll need to address these matters before your bankruptcy case is closed. If you forget to handle a lien, most courts will allow you to reopen the case at a later date.

13. Debtor Education Course

After you file your bankruptcy petition, you’ll need to complete a second class, called Debtor Education Course before you’ll receive a discharge. If you fail to submit your certificate on time, the court will close your matter without a discharge. Fixing this problem can be expensive because you’ll likely have to file a motion and another filing fee to reopen the case.

14. The Discharge

Congratulations, you’re done. At the end of a successful bankruptcy, the court will issue an order discharging your qualifying debts. Once discharged, you no longer have a legal obligation to pay it, and the creditor has no right to collect it.