The Bankruptcy Filing Process
There are a number of legally required steps involved in filing for bankruptcy. Failing to complete them can lead to the dismissal of your case.
Before filing for bankruptcy, people are required to complete a credit counseling session and acquire a certificate to file with their bankruptcy petition. The counselor must evaluate your personal situation, give advice on budgeting and debt management, and discuss alternatives to bankruptcy. You can find the names of government-approved credit counseling agencies in your area by calling the federal bankruptcy court closest to you or by visiting its website.
Filing for bankruptcy involves submitting a bankruptcy petition and financial statements showing your income, debts, and assets. You will also be required to submit a means test form, which determines whether your income is low enough for you to qualify for Chapter 7. If it is not, you will need to declare Chapter 13 bankruptcy instead. You will also have to pay a filing fee, though it is sometimes waived if you can prove you can not afford it.
You can acquire the forms you need from the bankruptcy court. If you enlist the services of a bankruptcy lawyer, which is generally a good idea, they should also be able to supply them.
When you have filed, the bankruptcy trustee designated to your case will arrange for a meeting of creditors, also known as a 341 meeting for the section of the bankruptcy code where it is mandated. This is a chance for individuals or companies that you owe money to ask questions about your financial situation and your plans, if any, to repay them.
Your case will be determined by a bankruptcy judge, based on the information you have provided. If the court decides that you have attempted to conceal assets or committed other fraud, you might not only lose your case but also face criminal prosecution. Unless your case is really complex, you usually won't have to appear in court before the judge.
After you have declared bankruptcy-- but before your debts can be discharged-- you have to take a debtor education course, which will give advice on budgeting and money management. Again, you will have to acquire a certificate showing that you have participated. You can get a list of accepted debtor education providers from the bankruptcy court or from the Justice Department.
Presuming the court decides in your favor, your debts will be discharged, when it comes to Chapter 7. In Chapter 13, a repayment plan will be approved. Having debt discharged means that the creditor can no longer try to collect it from you.
When to Declare Bankruptcy
Bankruptcy law exists to assist individuals that have taken on an unmanageable amount of debt-- commonly as a result of large medical bills or other unanticipated expenses that are no fault of their own-- to make a fresh start. But it is not a simple process and doesn't always result in a happy ending.
So before filing for bankruptcy, be sure to explore all your alternatives and be prepared for some of the negative consequences defined over. If you decide that bankruptcy is your only viable option-- as hundreds of thousands of Americans do every year-- keep in mind that the blot on your record will not be permanent. By using credit carefully in the future and paying your bills on time, you can begin to restore your credit and gradually put bankruptcy behind you.
For more information about chapter 7 and chapter 13 bankruptcy, or how to file your bankruptcy in Orange County, contact Thomas K McKnight LLP at (800) 466 - 7507 or visit our website at TKMLLP.com for a Free Consultation.