Filing for bankruptcy can be a humbling and intimidating process. It can also be very confusing if you've never done it before.
Many people will realize that they are in financial trouble and conclude that bankruptcy is a good option for them. However, they may not know how to approach the process or when things happen.
To give you a better sense of how bankruptcy works, I've provided a timeline below that will help you understand the process. A Chapter 7 bankruptcy can take anywhere from four to six months to complete, but there are a lot of moving parts that can affect that timeline.
Most states will require you to undergo formal credit counseling before you file for Chapter 7 bankruptcy. There is typically a time period preceding the official filing of bankruptcy by which you must complete the course. Most of the time, the credit counseling courses must be completed within 180 days of filing for bankruptcy.
When you complete the course, you will receive a certificate, which you must provide to the court. The agency that runs the credit counseling course may create a plan for debt repayment for you. If you receive one of these, you must provide it to the court as well.
You will have to select a credit counseling course that's offered by an approved agency through the U.S. Trustee Program.
File Bankruptcy Forms
Once you complete the credit counseling course, it's time to file all the required bankruptcy forms. While you can do this on your own, it's advisable to hire an experienced bankruptcy attorney to help you through the process. They will be able to ensure you do everything correctly and on time so that your case gets processed smoothly.
During this step, you will list all of your creditors and property that you own. You'll also provide information about the financial transactions you have conducted over the last few years. These are the documents that the court requires to consider your bankruptcy case.
At this time, you'll have to pay the court filing fee for the bankruptcy. This fee is currently $338. You can apply to pay in installments if you can't afford it all upfront.
Mail Supplemental Documents
After the court has received all of your forms, it will assign a bankruptcy trustee to your case. You will need to mail some supplemental documents to the trustee. At the very least, you will be required to submit a copy of the last income tax return that you filed.
The trustee may request other documentation based on your specific case. Your bankruptcy lawyer will help you understand what forms you need so that you can gather them to send to the trustee.
Meet with Creditors
Within 30 days of filing your bankruptcy case, you will likely have to attend what's known as a creditors' meeting. Many times, the creditors won't actually appear at the hearing.
The trustee will conduct the hearing, at which you'll need to testify under oath and answer any questions he or she may have about the information you submitted.
Most of the creditors' meetings don't take very long, and the questions aren't too intrusive. The meeting is just meant as a clarification for any questions or concerns that the trustee might have about your case.
Following this meeting, there are timelines for when the trustee must file any objections he or she may have to the exemptions you've requested. Your creditors will typically have 60 days following this meeting to object to their debt being discharged.
Finally, you'll usually have 45 days to determine what happens to any secured debt you have, such as your mortgage and car.
Attend Budget Education Course
Even though you've already attended a credit counseling course before filing for bankruptcy, you'll also be required to attend a budget education course after you file. This course will again be administered by an agency that's certified through the U.S. Trustee Program.
The course is meant to teach you how to make sound financial decisions so that you can avoid filing for bankruptcy again in the future. In most states, you will have 60 days after the creditors' hearing to complete the course.
Once you have completed the course, you will be given a certificate, which you must submit to the court. Failure to do so will result in your case being dismissed.
Wait for Discharge
After you have completed all of the above steps, the only thing left to do is sit back and wait for your debt to be discharged. This will usually be done not long after the deadline passes for objections from both you and your creditors.
If no objections are filed, the court will produce a statement of discharge explaining that your debts have been discharged according to the plan already established. If objections have been raised, the case will be longer. You will have the opportunity to respond to any objections or explain why your objections should be considered.
Again, it's important to have an experienced bankruptcy lawyer on your side to walk you through the process and help you present the best case possible.
Individuals who find themselves in financial turmoil may consider turning to bankruptcy for a fresh start. Bankruptcy can provide a lifeline to individuals who are strapped under mountains of debt, giving them a second chance to start anew from a financial perspective. But, is bankruptcy really a fresh start? Let's take a look at some […]