Preparing to File for Bankruptcy
Once you know what type of bankruptcy you will be filing for, you will need to begin to prepare your petition materials. You will need to create a detailed report of your monthly income, expenses, and all of your debt, both secured and unsecured. All types of debt must be included, including credit card debt, medical debt, unpaid bills, and missed mortgage payments. You will also need to provide an inventory of all of your assets, including your home, vehicle, and personal property.
Prior to filing, you will also need to complete a credit counseling course. This course, which must be facilitated by an approved agency, will assist with budgetary analysis and identifying other counseling opportunities.
Filing the Bankruptcy Petition
After you have assembled your petition materials, it is time to formally file for either Chapter 7 or Chapter 13 bankruptcy. The filing will need to be made with the appropriate bankruptcy court.
In your formal petition, you will be asking the court for protection from creditors as an insolvent debtor. Should your petition be approved, the court will generally grant the automatic stay, an order that halts all creditor actions. This means that all creditors that you have listed in your petition cannot directly contact you or pursue or proceed with lawsuits, foreclosures, repossessions, or wage garnishments. They can only the debts that you owe them through the bankruptcy court until your filing has concluded.
The automatic stay is one of the most advantageous elements of bankruptcy and can help stop imminent, financially catastrophic collection actions. Because the automatic stay typically remains in effect for the duration of your bankruptcy, you will have a substantial amount of time to raise funds and reorganize finances to repay debts that cannot be discharged.
The 341 Meeting and Next Steps
About a month after you formally file for bankruptcy, you will need to attend a meeting of your creditors in the presence of the Trustee assigned to your case. This is called the 341 meeting and is named after a number in the bankruptcy code. In the 341 meeting, the facts of your financial situation will be reviewed, and your creditors will register any objections that they might have. Your legal representation will be present in this meeting, and I can vigorously work to ensure that your interests are protected.
Chapter 7 filers will usually only have to appear in bankruptcy court once. They will only be required to appear before a judge if there are objections to the bankruptcy raised by one or more creditors. Chapter 13 filers will only generally need to go to court when their repayment plan is confirmed by the judge.
What happens following the 341 meeting depends on whether you filed for Chapter 7 or Chapter 13 bankruptcy. Chapter 7 filers will go through liquidation, the process by which nonexempt property is sold (“liquidated”) to partially repay creditors. This may sound scary, but you can leverage state or federal exemptions to protect many types of property, including equity in your home and car. Many lose very little in liquidation; others do not lose anything at all.
If you file for Chapter 13 bankruptcy, you will need to prepare and submit a repayment plan that combines all of your outstanding debts into a single monthly installment. The amount of this monthly payment should reflect your current ability to pay based on your monthly disposable income, not the total extent of your debt. You will have to continue to make this monthly payment for a period of 3 to 5 years.
I am extensively familiar with the processes of both Chapter 7 bankruptcy and Chapter 13 bankruptcy. My team can assist you in minimizing the impact of liquidation in Chapter 7 filings and creating a fair and reasonable repayment for Chapter 13 filings.