1. If I want to file for bankruptcy, what do I have to do before I file?
Today, you simply need to consider carefully whether bankruptcy is the right choice for you, and then gather the paperwork we talk about later in these FAQs.
In order to be eligible to file bankruptcy, you must receive credit counseling within the 180 days prior to filing. This can be accomplished in my office and is included in the fee. We use Greenpath Debt Counseling Services. Specifically, the law requires you to receive, from an approved agency, a briefing outlining the opportunities for credit counseling and help with a budget analysis. You may do this alone or in a group, and in person, on the phone, or even on the Internet. If, due to an emergency, you are unable to obtain credit counseling services from an approved agency during a 5-day period, the court may excuse the requirement temporarily but you still must fulfill it within 30 days (or in some instances 45 days) after filing. If you use a bankruptcy attorney, he/she will most likely be able to help you complete this requirement.
2. What documents do I need to file in a chapter 7 case?
You need to file these forms, all of which are best prepared by an attorney:
- the bankruptcy petition;
- a list of creditors;
- a schedule of assets and liabilities;
- a schedule of current income and current expenditures;
- a statement of your financial affairs;
- a certificate from the attorney or bankruptcy petition preparer (if there is one) indicating that you received a notice describing the different bankruptcy chapters and the services available from the credit counseling agencies as well as a statement specifying that anyone who knowingly or fraudulently conceals assets or makes a false statement under oath is subject to fine, imprisonment or both (if no one assisted you, then you must file a certificate that such notice was received from the court and read by you);
- copies of all pay stubs received by you within 60 days before filing;
- a statement of your monthly net income itemized to show how it is calculated;
- a statement disclosing a reasonably anticipated increase in income or expenditures over the following 12 months;
- if you have property that secures a debt, such as a car or home, a statement of intention with respect to treatment of the property in bankruptcy;
- a certificate from the approved non-profit budget and credit counseling agency that describes the services provided to you and a copy of the debt repayment plan, if any, developed by that agency;
- a record of any interest that you have in an individual retirement account; and
- an analysis of the means test.
If you fail to file all information noted above, with the exception of the last four, within 45 days of filing the petition, the case will be automatically dismissed.
Your attorney will need certain information from you to file these documents with the court, which is listed below.
Information to Take With You When Consulting a Bankruptcy Attorney
- A copy of every bill or letter you have received from a collection agency;
- A copy of any lawsuit or pleading you have received in a case in which you are involved;
- Two pay stubs representing an average pay period (include pay stubs for your spouse, even if he/she is not filing bankruptcy with you);
- Deeds to real estate in which you have any (even a partial) interest (including real estate you are purchasing or that you already own);
- The original or memorandum title for any cars, trucks, trailers, boats, motorcycles, mobile or motor homes you own or are purchasing, or other documents showing the value of your assets;
- Appraisals of your home, jewelry, etc., if you have them;
- Any policies of life insurance you have on your life, and/or the life of your spouse or children (where possible, you should contact the agent who sold you the policy and find out if the policy has any “cash surrender value.” If your policy has “cash surrender value,” please provide your attorney with that value); and
- Income Tax Returns filed in the previous two years.
3. What will happen in my chapter 7 case after I file all these documents?
Chapter 7 cases are pretty simple for the most part. In most cases, you will attend one creditors’ meeting and just wait for your discharge notice to come in the mail.
The bankruptcy trustee runs the creditors’ meeting, which is also called a 341 meeting (named after the section of the bankruptcy law that requires the meeting), and will question you under oath about all the information contained in your bankruptcy documents.
If you and your spouse file a joint petition, you must both attend the creditors' meeting and answer questions. It is important to cooperate with the trustee and to provide any records or documents requested.
In a simple case, the meeting will usually last just five minutes or so. While all creditors may attend, very few actually do. Be sure to bring a form of identification to the meeting, as well as proof of your Social Security number (usually your Social Security card). The trustee may ask you to provide additional documentation during the meeting and give you a few days to produce it.
The discharge notice will arrive in the mail about 60 days after you attend the creditors’ meeting. This piece of paper is proof that most of your debts have been discharged. You should keep it in a safe place.
4. Are there additional documents and other requirements in a chapter 13 case? What is required in the chapter 13 plan?
If you are filing a chapter 13 case, rather than a chapter 7, in addition to the documents mentioned above, you must file a plan that describes how much you will pay your creditors and over what time period. Your plan must provide that you pay creditors at least what they could have received in chapter 7 liquidation case, which basically means creditors must receive payments equal to the value of your non-exempt assets.
In addition, the plan must provide that you contribute all your “disposable income” to the plan. Disposable income is the income above what is necessary for the support of you and your family. However, in many cases the means test formula determines that amount. The means test is a very complicated test, but essentially requires that you average your income over the past six months (from any source including regular gifts from family members), then deduct a series of allowed expenses, and see what is left to pay creditors. You will most likely need an attorney to complete this analysis.
The chapter 13 plan lasts either until you pay your debts in full or until the end of a three- to five-year period. For certain low income debtors the maximum plan period without court approval is three years. For other debtors, creditors may be able to insist that the debtor pay a five-year plan.
Within 30 days of filing your petition, you must begin making payments under your plan. You make the payments to a trustee, who distributes the payments to the creditors.
Like in a chapter 7 case, after filing the bankruptcy petition, you must attend a creditors’ meeting (also known as a 341 meeting, named after the section of the bankruptcy law that requires the meeting). The chapter 13 trustee will conduct the meeting and will question you under oath about the paperwork you filed in your case. This creditors’ meeting will last longer than a meeting in a chapter 7 case. The trustee will likely question you about your income and your expenses, and may also require additional documentation at the meeting.
After the meeting of creditors, you, the chapter 13 trustee, and those creditors who wish to attend will come to court for a hearing on your chapter 13 plan. If there are no problems, the court will approve (“confirm”) your plan.
After completing payments under the plan and completing any financial counseling required, you will receive a discharge of any debts not paid under the plan.
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5. Must I produce tax returns before and after my bankruptcy?
You must provide the trustee and/or any creditor with copies of any federal tax return that you filed for the year prior to filing. If you do not comply with this request, the court may dismiss your bankruptcy case.
You must also file copies of any federal tax returns filed during the case with the bankruptcy court.
Any taxing authority may request dismissal of a bankruptcy case if you fail to file all required tax returns.
6. Do I have to list all creditors on the bankruptcy schedules?
You must list all your debts, with the name and address of the creditors. This is so creditors receive notice of the bankruptcy and get their fair share of any money paid to creditors. You may think that you should omit a creditor because you want to continue to pay the debt. This would violate the law, and it is unnecessary because you can always choose to pay a debt voluntarily, even though the debt has been discharged and there is no legal obligation to make payment. However, creditors are prohibited from taking any action to collect discharged debts.
7. What should I do if I discover that I forgot to list a creditor in the bankruptcy schedules?
As soon as you realize that you have ommitted a creditor, you should notify your attorney and provide him or her with all the information necessary to complete the schedule (the amount of the debt, the type and value of any collateral, and the name and address of the creditor).
In some cases, failure to list a creditor will result in harm to the creditor, such as if the creditor missed an opportunity to participate in the bankruptcy and/or receive payments. If this happens, your attorney can advise you about what additional action, if any, is necessary.
If an omitted creditor demands payment of the debt, you should inform the creditor of the bankruptcy, as discussed below.
8. What should I do if a creditor demands payment of a debt after I file my case?
Most efforts by a creditor to collect a pre-petition debt (one that you owe as of the filing of your case) or to obtain your property without the permission of the bankruptcy court are violations of the automatic stay.
The court may punish a creditor who knowingly violates the automatic stay and the creditor is liable to the debtor for harm caused. If you did not list a debt on the schedules filed with the court, the creditor may not be on notice of the bankruptcy. Therefore, you should inform the creditor of your bankruptcy and request that the creditor stop the collection efforts.
If you are represented by an attorney, you should give the creditor your attorney’s name and telephone number. If you are not represented by an attorney, you should give the creditor additional information about the case—the date of filing, the court in which the case was filed and the case number. If improper collection action continues, you should consult with an attorney, notify the trustee or seek protection from the court.
9. Is there anything I should know about the timing of my case?
Probably the most important thing you need to know is that once you have decided to file for bankruptcy, you need to stop using your credit cards. Anything that you charge knowing you will not pay the money back is fraud under the bankruptcy law and the debt may not be discharged. Also, if you charge luxury goods before the filing or take out cash advances right before your case, the debt is presumed to be non-dischargeable even if you did not know you were filing for bankruptcy when you charged the items or took out the cash advances. Consult with experienced bankruptcy counsel before deciding when to file for bankruptcy.
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Contact me, bankruptcy attorney Walter Metzen to learn more about how I can help you get a Fresh Financial Start!.