Bankruptcy is a legal proceeding in which a person who can not pay their bills gets a fresh financial start. The right to file for Bankruptcy is provided by federal law. Filing Bankruptcy immediately stops your creditors from seeking to collect debts from you, at least until they are sorted out according to the law. Bankruptcy may make it possible for you to:
- Eliminate the legal obligation to pay most or all of your debts
- Stop harassing collection calls
- Stop foreclosure on your house or mobile home
- Allow you an opportunity to catch up on missed home and car payments
- Prevent repossession of a car or other property
- Force a creditor to return property even after it has been repossessed
- Stop pending and potential lawsuits
- Stop wage garnishment
- Restore or prevent termination of utility service
- Allow you to challenge the claims of creditors who have committed fraud or who are otherwise trying to collect more than you really owe
- Remove a second mortgage or HELOC (in Chapter 13 Bankruptcy)
What Bankruptcy Can Not Do
Bankruptcy can not, however, cure every financial problem. Nor is it the right step for every individual. In bankruptcy, it is usually not possible to:
- Eliminate certain rights of ”secured” creditors. A creditor is ”secured” if it has taken a mortgage or other lien on property as collateral for a loan. Common examples are car loans and home mortgages. You can force secured creditors to take payments over time in the bankruptcy process and bankruptcy can eliminate your obligation to pay any additional money on the debt if you decide to give back the property. But you generally can not keep secured property unless you continue to pay the debt.
- Discharge types of debts singled out by the bankruptcy law for special treatment, such as child support, alimony, most student loans, court restitution orders, criminal fines, and most taxes.
- Protect cosigners on your debts. When a relative or friend has co-signed a loan, and the consumer discharges the loan in bankruptcy, the cosigner may still have to repay all or part of the loan.
- Discharge debts that arise after bankruptcy has been filed.
The Process – Phase 1
Once you retain our firm to handle your Bankruptcy, we will provide you with some items that we will need your help to complete. The main item we need completed is our questionnaire.
This questionnaire asks you to provide us with:
- some personal information (name, address, ss#, …, );
- information on your assets (a breakdown of bank accounts, cars, homes, …);
- list of creditors to make sure that we have all of your creditors, since not all of your creditors will appear on your credit report;
- information on your last 6 months of income; and
- information on your living expenses.
We will also ask you to gather certain documents for us, such as bank statements, tax returns, paystubs, divorce decrees, or other items we will need to either complete your paperwork or that we will have to provide to the Bankruptcy Trustee. You will also then have to complete a Credit Counseling course that is usually completed on the internet.
The Process – Phase 2
Once you complete the questionnaire and deliver the requested documents, we will prepare your paperwork. We will have you come to our office to review and sign the Petition, Schedules and related items. We will then file your case once you have signed the documents, completed the Credit Counseling course, and paid the appropriate fees. Keep in mind that once your case is filed, you will have to complete a second course on financial management. What happens next depends on whether you filed a Chapter 7 or a Chapter 13 case.
The Process – Phase 3 For Chapter 7
If you filed a Chapter 7, about a month after your case is filed, you will need to attend a Meeting of Creditors at the Bankruptcy Court. During this meeting, the Trustee will ask you questions for a few minutes and your creditors may also seek some information from you. Typically, however, no creditors will show up. Usually, our clients are understandably quite nervous about attending the Meeting of Creditors and then they are relieved once it is over and they see that it is not near as bad of an experience as they feared. Most of the time, about 2 to 2 ½ months after the Meeting of Creditors, you will receive you Discharge. This closes your case and is the final step in extinguishing you dischargeable debts.
The Process – Phase 3 For Chapter 13
In a Chapter 13 case, you will have to start making your monthly “Plan Payments” to the Trustee about a month after your case is filed. Also, the Meeting of Creditors is about 6 to 8 weeks after the case is filed. Then, approximately a month after that we can “confirm” your case, which is the process where the Bankruptcy Court approves your plan. Also, if we are doing items such as removing your second mortgage, attempting to modify your first mortgage, or negotiating a settlement with the IRS or other creditor, we should take care of these items before your case is confirmed. Sometimes, we will need to continue the confirmation date until we have resolved all of these types of issues. After your case is confirmed, you will need to make all of your scheduled Plan Payments. Once this is done, you will receive your Discharge.