What To Expect When I File

What happens when I ask for debt relief under the Bankruptcy Code?

1. All bankruptcy cases begin with a Petition. The Petition is a document that includes a listing of the debtor's assets, liabilities, past and current financial circumstances, means testing and the debtor's intentions regarding the assets of the estate.
2. The Petition will be under Chapter 7 or Chapter 13 of the Bankruptcy Code. Chapter 7 liquidates your debts via discharge and you will have to qualify for Chapter 7 filing by a financial means test. Chapter 13 allows you to submit a repayment plan for the courts approval for 100% or secured creditors and between 0 to 100% of unsecured debts for up to 60 months. The amount approved for repayment must be affordable based on your current financial picture.
3. Individual debtors must, within six months of filing for bankruptcy, must obtain an individual or group briefing from an approved budget and credit-counseling agency.
4. All debtors must also file their most recent year's federal tax returns, to verify income. If a debtor is approved for a Ch 13 plan and pays less than 100% of their unsecured debt, the debtor is required to turn over tax refunds to the trustee for application toward their debt during the term of their bankruptcy.
5. When you file bankruptcy, federal law imposes an "automatic stay" which prevents your creditors from taking any action to collect debts against you, including court judgments and tax debts, during the pendency of the bankruptcy. For instance, if your employer was garnishing your wages prior to filing of the bankruptcy, the bankruptcy filing will stop this lawsuit. The Bankruptcy Court will send out a Notice of Filing and a Notice of Stay to your creditors. This Notice makes it illegal for your creditors to continue trying to collect from you, although they are free to contact your attorney.
6. Between four and six weeks after your filing, you will have to attend a "Meeting of Creditors" or a 341 Meeting chaired by the Bankruptcy Trustee assigned to your case. Unless your case is unusual, this will be a brief meeting. Generally, the Trustee will ask you a few form questions and a few questions related to your business, and then will ask if there are any creditors present, with questions. Usually there will not be, although some credit card providers attend many or most Meetings of Creditors.
7. If the Meeting of Creditors is uneventful, the process is probably over for you and your lawyer. If you are seeking a Chapter 7 Petition, you will receive a Notice of Discharge in about six weeks. If you are filing under Chapter 13, you and your attorney will have discussed a payment Plan, and you will receive Notice of Confirmation of the Plan in about the same time, and begin making payments.
8. If the creditors have problems with your Petition, they have a certain amount of time to file an adversary proceeding. An adversary proceeding asks the Bankruptcy Court to refuse to discharge a certain debt for some particular reason. The most common reason is fraud, which either gives rise to the debt (like if you got the money by stealing from your employer) or fraud in the bankruptcy (like lying about your assets). An adversary proceeding goes on like regular litigation, and it can take as long as regular litigation. Your discharge of these debts will be delayed until the adversary proceeding is resolved.
9. Prior to receiving a discharge, the individual debtor must complete a personal financial management course. This information is provided to you by our office and upon completion of the course, your certificate is automatically sent to our office for filing with the court.
10. If there are no problems with your Chapter 7 Petition, or if you have paid off your creditors under a Chapter 13 Plan or once any adversary proceedings are resolved, you will receive a Notice of Discharge and a fresh financial start
11. If you file under Chapter 13, your payment Plan will usually be on a timeline of three or five years.