March 22nd, 2019

What Do You Need to Know About Filing for Bankruptcy?

Filing for bankruptcy is a long process, but it doesn’t even need to be a complex one. It’s a matter of filling out of paperwork and approaching things in the right order. Whenever the debtor declares bankruptcy, there filing is carefully examined by Trustee, a government employee.

The trustee is responsible for overseeing bankruptcy and handling issues throughout the process. Most petitions deal mainly with the trustee and won’t have to show up in court with their San Diego Bankruptcy Lawyer. 

Following, we are going to explain the process in detail and clear some common misunderstandings. These are common misunderstandings that cost people their whole fortune. 

Financial Inventory

The first thing you should do is assemble your financial information. Collect as much information as possible. It is a time taking process. If you are married, but your significant other doesn’t file bankruptcy including their information, you might as well include their information. The inventory consists of the following details:

Debt

You must add the creditor, current balance, interest rate, monthly payment, and other relevant information. It includes debts and the one you are currently paying back. 

Income

You are required to list any money you received for any reason in the six months. You will also need to add the money you will receive in the future. It includes your working income, compensation, income from a side job or divides end, investments, pensions, or money. It also includes the money contributed to the household by other people. 

It also adds money from spouse and family member. You better not add anything from your social security. 

Asset and Property

You have to include everything you own that has value including stocks, accounts, real estate, cars, art, and collectibles and saving accounts. The story doesn’t end here; it will also include things like home furnishing, clothes, and personal possessions. Anything you have that is particularly valuable; it has to be listed.

These are personal possessions and are considered exempt. This way, you are unable to enter Chapter 7 bankruptcy. All conditions of exempt are not safe. So, you better make a comprehensive list and ask the trustee or attorney what will be considered exempt.

Monthly Expenses

It means you will include your costs for rent and mortgage. It will also include food, utilities, medical expenses, clothing, transportation, expenses, child support as well as alimony. When you list these variables, you have to calculate the average based on last year’s monthly bills.

The trustee might request additional documentation to understand as well as verify the stuff you just claimed.

Credit Counseling

You might have to undergo credit counseling from the approved agency at six months before you submit the petition. This is the type of counseling. It will only take an hour or so. This is conductive over phone or internet. This does cost under $100 for each session. If you forget the credit counseling, and a petition won’t be accepted.

If you want to get the most out of counseling appointment, this way, you will have your financial inventory before you go. It will help you determine what sort of bankruptcy will suit you best. 

In case you go with Chapter 13, it will help you with a payment plan. So, you must understand payment plant because payment must start no later than 30 days once you submit the petition, even if the petition is not even accepted. When you file the petition, you will have to profile proof that you have received credit counseling. 

Creditor Meeting

Once you have filed the petition and it got accepted, you will credit creditor notice one you added your debt in the petition. The letter will also notice that one of them will stay on account. After 3 or 6 weeks, the trustee will set up a meeting for a creditor. During this meeting, something called the 341 meeting will be carried out. 

After this, the lender will send a representative to question you or trustee. While lenders don’t attend, if you are married, then your spouse has to attend. Even if you file for bankruptcy separately or don’t file it all, a bankruptcy judge will not attend this meeting. In case, you are sworn under oath; you should answer every question with the best of your ability. 

Automatic Stay

Once you file for bankruptcy petition, automatic stay prohibits creditors from making further collection attempts. To put simple, the creditor is unable to start or continue their court proceeding, especially if they are under a debt. 

They can enter liens against property or try by any means to take money or property to satisfy an unpaid debt.

In chapter 13, the creditors prohibit from attempting to collect money from co-signer on unpaid secured debts including a home mortgage. There is one important exception to the automatic stay. The automatic payments take out of paycheck for the 401K loan as it will continue. 

After-Meeting

 Once the creditor has a chance to question and review payment plan, they will submit formal objection or do nothing. If they choose to subject an objection, it will take 60-90 days to do so from the time of the meeting.

They will request extend the time for objections. The bankruptcy petition moves forward without any objection even after the objection period expires.

Chapter 7

This is the next step of liquidation of assets. The trustee is responsible to pay creditor from proceeds after the assets are liquidated. A bankruptcy judge will issue a discharge order. It is an official letter stating that remained of debt. This has been discharged or wiped out; the lenders are not able to continue the collections attempts. 

Chapter 13 

In this chapter, there are almost no objections to the payment plan. The judge will approve this at the confirmation hearing. The hearing will be held within 45 days of the creditor meeting. As the payment plan receives official approval, the subject will start to make payments directly to trustee on a regular basis. 

The trustee will pay the creditor for you. After completing payment pan, the judge will issue a discharge order for any remaining debt. 

Post Credit Counseling 

During the creditor meeting and when you are about to make last payment, you will require to go through post-bankruptcy credit counseling. If you have chapter 7, this will happen within 45 days of creditor meeting.

If you have chapter 13, it will happen before the day you make your last payment or day you file a motion to discharge bankruptcy if you don’t finish the payment plan.

If you don’t send a confirmation to the trustee, they might have completed post-bankruptcy counseling. It won’t be able to complete the bankruptcy process and get your debts discharged. 

What Else Should You Know?

Apart from the chapters and basic steps to file for bankruptcy, you have to consider the following things

Spouse

A married couple with financial issues can file together or separately for bankruptcy. Most couples do it together because they can’t afford to do separately as well they don’t have to co-sign on another loan. 

This might seem logical for one partner to take fall and declare bankruptcy. You should know this will be useless if both spouses co-signed the loan.

Get a Lawyer or Not?

Bankruptcy is complex, and most people choose to use an attorney. For obvious reasons, bankruptcy doesn’t take credit cards. This is why you should consider bankruptcy before you go completely broke. You won’t have to hire an attorney. However, most process is administrative. 

Bump Process

Once you file the petition, it is not guaranteed or approved that all your debt will be discharged. If this is the case, then credits will raise objections, but the court will also prevent the debt from being discharged for other reasons. The court will revoke discharged which is allowed if there are reasons to believed it should not be processed in first place. Some of the issues you face during bankruptcy can include the following:

  • Court evidence that debtor is acting fraudulent or has committed perjury
  • Debtor fails to provide the needed tax documents
  • In case the debtor destroys or hides important document intentionally
  • If you acquire new property or other assets during the bankruptcy proceeding and will not notify the trustee or court
  • The debtor was asked for an explanation, information, additional document during an audit of case
  • The debtor doesn’t complete a credit counseling program
  • Debtor fails to complete the chanter 13 payment plan

The story doesn’t end here; the subject will not be able to declare bankruptcy within a short time. Length of time between bankruptcies depends on the type of bankruptcy in any case. 

  • When it comes to filing a second Chapter 7 bankruptcy after the first one,  you should wait for eight years 
  • Between chapter 7 and chapter 13 bankruptcy, you should wait for four years
  • Between chapter 13 and second chapter 13, you have to wait for two years 

Final Word

Advantages or repercussion of filing for bankruptcy, it can be complex. The process is overwhelming. If you feel bankruptcy is a good option, you have to follow the above steps and make most of the required credit counseling session. This is why you better understand the process and will affect now and for futures. 


Jamshaid Chaudhary

I began writing as a professional on my personal blog and then discovered my true calling, which is writing about technology, News and gadgets in general. I am a technical writer, author, and blogger since 2010. An industry watcher that stays on top of the latest features, extremely passionate about juicy tech news and everything related to gadgets. For tech tips, https://www.facebook.com/chandni888