The Chapter 7 and Chapter 13 processes have similar beginnings.
First, you need to complete a credit counseling course before filing a bankruptcy petition: This course can be completed online or by telephone. There is a fee required for this course, typically between $20 and $45.
No worries! Guiding clients through the credit counseling course is part of the services offered by this firm.
The bankruptcy petition includes a set of Schedules (listing all of your types of assets, creditors, debts, income and expenses), Statement of Financial Affairs (a series of questions covering items not addressed in the Schedules), and the Means Test form, among other required documents. This firm assists clients in completing these documents.
Making sure all documents are complete and accurate is one of the most critical steps in making sure your bankruptcy case proceeds smoothly. A bankruptcy filing requires you to sign in several places, under oath, that the information being submitted is true and correct, to the best of your knowledge. Before filing you will need to provide or review the following documents and information:
Photo ID (such as a state-issued driver’s license or ID card).
Proof of Social Security number (such as an original Social Security card, W-2 form, some Medicare or Medicaid cards, or official correspondence from the Internal Revenue Service or Social Security Administration, or Military DD Form 214).
Federal and state tax returns for the past two years, if you were required to file tax returns.
Pay stubs from each place where you have worked in the past 6 months (sometimes “year to date” information on a recent pay stub can suffice).
Copies of bank statements for all open bank accounts for the past 90 days.
Proof of insurance on all motor vehicles with debt.
Copies of all bills, including any judgments and letters from creditors demanding payment. (It’s best to include all possible addresses and descriptions of anyone who might be a creditor, to make sure they are included in your bankruptcy case and receive notice, so be as thorough as you can.)
Information about your major assets, including your home, any other land or real property, motor vehicles, any insurance policies, any recent appraisals you have received on your property, and any recent credit applications or financial statements you have prepared or submitted.
The Clerk of Court requires a filing fee for every bankruptcy case (with rare exceptions for Chapter filers with very low income). The filing fee for Chapter 7 cases is $335. The fee for Chapter 13 cases is $310. In most cases, the filing fee can be paid in installments over a period of 4 months.
This firm assists clients who need to request more time to pay the filing fee, and I will make sure you know exactly what you need to do in order to pay the filing fee before the deadline.
The Clerk of Court will send a notice of the bankruptcy filing to the creditors you listed. You will also get a copy of the notice, which sets certain deadlines and dates, including the date of the meeting of creditors.
The notice from the Clerk sets a date for the meeting of creditors (or “341 meeting,” named for its section in the Bankruptcy Code). Your appearance at the meeting of creditors is mandatory. Your attorney will attend this meeting with you.
This meeting of creditors is an opportunity for creditors to ask questions about your bankruptcy case. The meeting is optional for creditors, and often none appear at these meetings. Every person filing bankruptcy must attend and be examined by the Trustee. The Trustee’s questions generally will be about your assets (the things you own), your debts (the people you owe money to), and your current income and expenses: You will already have provided this information at the time you filed your bankruptcy case, so the meeting of creditors will normally just be a final review to make sure that information was accurate and complete.
The Chapter 7 Process
For most Chapter 7 debtors, the meeting of creditors is the one and only appearance they will need to make. You won’t need to attend any Court hearings.
In the simplest and most common Chapter 7 cases the Trustee issues a report after the meeting of creditors stating that there are no assets to sell. At that point your case will be on track for a discharge.
Before you can receive your discharge you will need to go through one more mandatory course, called a “financial management instructional course.” It’s more thorough than the pre-filing credit counseling. You will need to provide a certificate from the provider showing that you completed the course, and this will need to be filed with the Bankruptcy Court before you get your discharge.
You won’t be on your own! All clients of this firm receive reminders of this requirement, along with any assistance needed to complete this critical step.
With this final step out of the way, you will receive a Chapter 7 discharge. With certain exceptions (such as student loans, child support and alimony, and most tax debts), a Chapter 7 discharge wipes out all the debts you had before you filed the case. The “automatic stay” that protected you during the bankruptcy case becomes the discharge injunction, forbidding creditors from taking any action against you on a debt that was discharged.
Prior to receiving a discharge, you may be asked to reaffirm certain debts. You may also want to redeem certain debts, paying them off at the current value of the collateral. Both of these items are optional, and you should consult with an attorney before making a decision.
After discharge, you can begin to rebuild your credit. A Chapter 7 bankruptcy filing is deleted from a credit report after 10 years. This will affect your credit score, but the way that credit scores are formulated are mystical and include many factors. Discharging burdensome debt in bankruptcy makes it possible for you to handle new debt, and lenders will consider this, along with the fact that you can’t file another Chapter 7 case for eight years, when deciding to extend credit.
The Bankruptcy Process
The Chapter 13 Process
When you file your Chapter 13 bankruptcy case, you’ll also prepare a plan that lists how you will treat each type of debt. The plan requires you to make monthly payments to the Chapter 13 Trustee, usually for a period between 3 and 5 years. The amount of the plan payment depends on your creditors and how you are proposing to treat them.
By the time you attend the meeting of creditors you should have made your first plan payment (or made sure your employer has withheld the payment).
After you attend the meeting of creditors, the Bankruptcy Court will hold a confirmation hearing to consider whether your Chapter 13 plan can be approved.
Creditors and the Trustee have the right to “object” to the Chapter 13 plan, but only the Bankruptcy Judge gets to decide whether or not to approve the plan. In most cases, an objection is a formal request from the Trustee to complete certain tasks required by the Bankruptcy Code so that the plan can be confirmed. Creditor objections often request different treatment in the plan.
The term “objection” can sound ominous, but it’s a common form of communication that isn’t so different from a “to do” list. Your attorney should know how to efficiently address these objections, though your help is sometimes necessary to make sure the issues can be resolved.
What actually happens at the confirmation hearing? If you are making payments to the Chapter 13 Trustee and there are no objections, the Trustee will probably announce that the case should be confirmed with no formal hearing required. For a plan to be confirmed, the Trustee and the Court need to decide that the plan meets certain conditions, such as:
Making sure that you have started making the required plan payments.
Demonstrating that the payment amount in the plan is high enough to deal with all of the claims, and that you will be able to make the payments. This is often referred to as “feasibility.”
Concluding that the unsecured creditors will receive at least as much from the Chapter 13 plan payments as they would receive in a Chapter 7 case (where a Trustee would have the opportunity to sell property to pay those claims).
Making sure that secured creditors are treated appropriately.
Demonstrating the case was filed and plan proposed in good faith.
Showing that you are contributing all your available disposable income to the Chapter 13 plan.
Making sure you have filed all required tax returns for the past four years.
Proving that you have made all payments due under a Court order for alimony or child support since filing the bankruptcy case.
Confirmation hearings are public hearings, and you are of course welcome to attend your own hearing. Check with your attorney to see if your attendance is required. Confirmation hearings frequently need to be continued in order to address objections, or to address claims filed by creditors.
Once your Chapter 13 case is confirmed, you must make the Chapter 13 plan payments every month.
In addition to making monthly payments to the Chapter 13 Trustee, you must stay current with any direct payments to creditors that are not covered by the Chapter 13 plan (for example, a mortgage payment on your home, unless your plan specifically says the Trustee will make those payments).
When your Chapter 13 plan is completed you need to go through one more mandatory course, called a “financial management instructional course" (discussed above). Actually, you don’t need to wait until you’ve completed your plan to take this second course. You can take it any time after filing the bankruptcy case, and it’s often a good idea to take the course as soon as you can.
As your plan is winding down, your attorney will help you complete some simple, final paperwork, and you will be on track to receive your discharge.
With certain exceptions, a Chapter 13 discharge wipes out all the debts you had before you filed the case. The “automatic stay” that protected you during the bankruptcy case becomes the “discharge injunction,” forbidding creditors from taking any action against you on a debt that was discharged.
A Chapter 13 bankruptcy case is deleted from a credit report 7 years after the filing date. Your credit score (a formula even more mysterious than the one for Coca Cola, or KFC’s original recipe) will take the bankruptcy filing into account, which means your score will be lower at first. But lenders may consider the fact that you have lightened your debt load, and you will have opportunities to rebuild your credit.