Bankruptcy laws are a series of federal laws enacted to allow people to be relieved from their debts and start over with a clean slate. Making the decision to file for bankruptcy is not an easy one. It is a decision that many millions of Americans have come to that allows them a new start and a way to get out from under crushing debt. If your debt has become too much, bankruptcy may be the best decision for you and your family.
Once you have analyzed your debt, weighed the pros and cons of bankruptcy and have made the decision to file, you may have further questions about how to actually get started on you bankruptcy petition with the courts and what the steps of bankruptcy entail. The filing actions are different depending upon the type of bankruptcy you are seeking whether it is Chapter 7 or Chapter 13 bankruptcy.
Filing for Chapter 7 –
A typical Chapter 7 bankruptcy case is relatively straightforward.
- To start your bankruptcy case, you must file a packet of forms in court. This includes the bankruptcy petition, a number of schedules listing financial information, and a form on which you list your income and expenses, to show that you can pass the Chapter 7 means test (a prerequisite for using Chapter 7).
- Once the paperwork is filed, a bankruptcy trustee takes over your case.
- Courts require mandatory credit counseling during the six-month period prior to filing for Chapter 7 bankruptcy. Filers must get the c/blog/2019/08/the-means-test-explained/ounseling from an agency that has been approved by the United States Trustee’s Office.
- A meeting of creditors will take place. At the meeting, you will have to answer questions about your finances and bankruptcy forms, under oath, from the trustee and any creditors who show up (often, none attend the meeting).
- At this point, when you have met all the requirements, the court will decide if your discharge of debt will be granted. If you have any nonexempt property, the trustee will decide whether it’s worth seizing and selling, to distribute to your creditors.
Filing for Chapter 13 –
In a typical Chapter 13 bankruptcy case you make payments to the bankruptcy trustee for three or five years in order to repay debt. Among other things, you must file a big packet of papers and attend two meetings. When the case is over, you may receive a discharge of some debts.
- Similar to a Chapter 7, all individuals filing for Chapter 13 must attend a credit counseling course within the six-months prior to filing.
- A fairly large packet of court documents must be carefully filled out. The packet of forms, which consists of the bankruptcy petition, schedules (which list all of your property, debts, and other financial information), and other required forms. You must also draft and submit a proposed Chapter 13 repayment plan.
- A bankruptcy trustee is assigned to your case, again, very similar to the Chapter 7 steps. The trustee is responsible for reviewing your plan and ensuring it complies with the law, collect payments under your plan and distribute them to creditors, monitor your monthly income and expense reports, among other things.
- A meeting of creditors takes place. This meeting, also called a 341 hearing, is a chance for creditors and the trustee to ask questions about your debt and repayment plan.
- The court then decides if any assets are dischargeable, and what the payment plan will be. A confirmation hearing will address creditor concerns and make a final decision on the case.
- The repayment period begins once the court has made a final ruling.