How to File Bankruptcy
How to File
Bankruptcy is a series of federal laws enacted to allow people to be relieved from their debts and start over with a clean slate. The laws changed in 2005, making the road to a fresh start more complicated, so it is important to completely understand the benefits and drawbacks before you decide to declare bankruptcy and the best way to do that is to talk to a lawyer who does bankruptcy filing every day of their lives.
2005 Bankruptcy Act Credit Counseling
The 2005 Bankruptcy Act requires all individual debtors who file bankruptcy on or after October 17, 2005, to undergo credit counseling within six months before filing for bankruptcy relief and to complete a financial management instructional course after filing bankruptcy. Our office can arrange for you to do the take the necessary counseling test on line in as little as 90-minutes and a nominal fee: typically $50.00. Such an online course is critical if we are to process an emergency bankruptcy filing to prevent upcoming repossessions or a home foreclosure.
How to File Bankruptcy – Step By Step
To begin the bankruptcy process it is necessary to itemize your current income sources; any major financial transactions for the last two years; your monthly living expenses; a list of your debts (secured and unsecured); and all real property (i.e. all assets and possessions, not just real estate). You should also collect your last two years’ tax returns, deeds to any real estate you own, the titles to your car(s), and the documents for any other loans that you might have.
Once you have gathered this information, your can need to determine which property you believe is exempt from seizure based on the California exemptions. Since this is pretty complicated, and there are a lot of potential pitfalls for those attempting to do this themselves, most people seek the help of an experienced bankruptcy attorney to help them with the exemptions. To actually file, either you or your attorney, will have to file a two-page bankruptcy petition and several other required forms at your California district bankruptcy court. These forms, are essentially your “package of schedules” which are a standard method that paints a picture of your current financial status and recent financial transactions for the prior two years. If the bankruptcy judge or your creditors convince the court that you have not been entirely forthcoming in your bankruptcy declarations and filing package, it could jeopardize the outcome of your petition or worse.
The court cost for filing a Chapter 7 bankruptcy is $306. The Chapter 7 fee cannot be waived but you may be able to pay it in installments. The fee for a Chapter 13 bankruptcy is $281 and cannot not be waived as a Chapter 13 presumes that you have some level of income as you petetion to move forward under a court-monitored repayment plan.
Chapter 13 Requirements
If you are planning to file a Chapter 13 bankruptcy, a proposed repayment plan must also be submitted to the bankruptcy court. This plan shows what you (or your attorney) propose are reasonable monthly expenses; how much money will you have left over to put toward your outstanding bills; and how will this money be divided up to pay those creditors that you owe. Priority claims, such as taxes and back child support payments, must be paid in full; while unsecured debts, such as credit card debt and medical bills, are usually paid in part. It is not uncommon that unsecured debt can be paid off for as little as 10 cents on the dollar.
If you have filed Chapter 13, you must then begin making your planned payments. You or your attorney should arrange with the court for these payments to be deducted from your wages so you don’t end up in trouble by failing to meet your agreed repayment schedule.
The minute you have filed your paperwork with the bankruptcy court and it is accepted, an “Automatic Stay” goes into effect. The “Automatic Stay” provision prevents creditors from making direct contact with you, making any further attempt to collect from you PERIOD. An “Automatic Stay” will also STOP any foreclosure proceedings.
Upon filing your bankruptcy, the bankruptcy court will assume legal control of your debts and property not covered (and protected) by your California exemptions. A bankruptcy trustee will be appointed to your case by the court. The job of the trustee is to see that your creditors are paid as much as possible based upon your plan and the monies directed to the court. The trustee is a person who will thoroughly review your paperwork, particularly the assets you have in your possession and the exemptions you wish to claim, and has the authority to challenge any of your declarations or exemptions. This is an area where having competent legal counsel on your side could make ALL the difference in a good experience vs. serious headaches.
“341 Meeting” of Creditors
About 30-days after filing your bankruptcy case, the trustee will call a first meeting of creditors, where, you, the debtor must attend. This proceeding is also referred to as the 341 meeting, named after that specific section of the bankruptcy code. In Chapter 7 bankruptcy meeting, creditors rarely attend; however it is common for at least one creditor to show up for a Chapter 13 meeting, especially the creditor desires to challenge your proposed repayment plan.
Any objections to your plan are most commonly resolved by immediate negotiation between the debtor or the debtor’s lawyer and you (the creditor) or your lawyer. If a negotiated compromise can not be agreed to, a judge will intervene and make a decision.
While a 341 meeting would seem scary and daunting to those attempting to do this on their own, those who have their bankruptcy strategy pre-planned, and their paperwork prepared by a competent attorney, and who is represented at this 341 meeting by an attorney will be pleased to note that the actual meeting rarely exceeds 10 minutes in length. Since Chapter 7 filings involve no non-exempt assets you will have to turn over non-exempt property, or its fair market value in cash, to the trustee immediately following the meeting. This is another slippery slope where it is advisable to be properly counseled by an experienced bankruptcy lawyer as to all the intricacies and ramifications. of this settlement process. The trustee will sell any property turned over at this meeting and distribute the proceeds to your creditors. If the property isn’t worth much or the trustee determines that it would be difficult to sell or not worth his or her time, the trustee may decide to return the property to you. Trustees and creditors have 60-days to challenge the debtor’s right to a discharge. If there are no challenges you will receive a notice from the court that your dischargeable debts have been discharged within three to six months.Chapter 13 Plan Confirmation
If you filed a Chapter 13 plan will need to attend a hearing before a bankruptcy judge who will either confirm or deny the repayment plan. If your plan is confirmed and you make good on it, the balance (if any) on the dischargeable debts you owe will be eliminated at the end of your term.
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