Jun 10
11
What Are The Steps To File For Bankruptcy
Many Americans are feeling the economic hardships and are driven into bankruptcy for one reason or another. Many do not understand bankruptcy or the process to file for bankruptcy. In this guide, I will try to explain the process of filing for bankruptcy.
No matter if you are filing Chapter 7 bankruptcy or Chapter 13 bankruptcy, it all starts with the credit counseling with an approved credit counseling agency. Most agencies will provide this counseling in a classroom session or over the Internet. The purpose of this credit counseling is to give you the 101 lessons on managing your money. It will teach you how to create a budget, and advise you on various financial instruments such as 401k, IRA, mortgage loans and whole lot of others. This is the pre-bankruptcy credit counseling. Once you have completed the pre-bankrutpcy counseling, you will submit it along with your bankruptcy petition.
The bankruptcy process officially begins by filing a petition with the state that you are in. In the bankruptcy petition, you would indicate if you are applying for Chapter 7 bankruptcy or Chapter 13 bankruptcy and include at least the following documents:
- Schedules of assets and liabilities
- Statement of financial affairs
- Pre-bankruptcy credit counseling proof
- Last 60 days of paystubs
- Most recent tax return
- Associated filing fees
- bank statements
- retirement plan statements
- other sources of income
- all creditors and the debt
- alimony
- child support
- legal judgment
Chapter 7 bankruptcy has become more difficult to apply for because you will need to pass the “means test“. The “means test” is used to determine if your income is above the state’s median income. If you pass this “means test” (where your income is less than or the same as the state’s median income), then you are eligible to file for Chapter 7 bankruptcy. If you fail the “means test” or if your income is much higher than the state’s median income, your only option is to file Chapter 13 bankruptcy.
Once your petition is submitted into the bankruptcy court, you will wait 7-10 days and by then you will be assigned a bankruptcy trustee and the date of the 341 meeting (also known as meeting with the creditors). Normally your 341 meeting with occurs within 30 days after you have filed the bankruptcy petition.
The purpose of the trustee is and the 341 meeting is to give the trustee the chance to review all your bankruptcy documents and to make you swear on oath that everything is truthful. The creditors that you owe money can be present in this meeting if they choose to do so. If the creditors do show up at the 341 meeting, they are most likely there to challenge your request to have the debt discharged.
After the 341 meeting with the trustee and creditors, you will basically wait 45-60 days. This the period of time that the bankruptcy system gives the creditors to file any protest against the debt discharge. If no creditor objects to the debt discharge, the bankruptcy judge assigned to your case will issue the discharge papers. The bankruptcy discharge paper is ultimately what you are seeking for in this entire process.
Given the massive number of bankruptcy filings in the last few years, you should expect your case to be settled from the start to finish in about 6-9 months.