Monday, June 13, 2011

How Hard is it to File for Bankruptcy?

It's not that hard to file for bankruptcy, but the process and mountain of required forms and documentation can be a little intimidating. This post will give you the highlights of the required bankruptcy forms and some information on the process.

The process is almost the same whether you're filing for a chapter 7 or a chapter 13, with the exception of designing and getting the payment plan approved.

Let's start with the process for a "do-it-yourself", pro se bankruptcy filing.

First: The Petition & Forms
The bankruptcy petition itself is actually very simple. It's only three pages and asks basic questions about your personal information, address, social security number, the type of bankruptcy you want to file for, the nature of your debts (primarily personal or business debt), any joint filers, etc.

You'll also need to provide a certificate of credit counseling along with the petition. You will need to attend this counseling session before you file the paperwork.

Required Forms
In addition to the petition and the counseling certificate, you must complete and include all of the following forms. The links go to the actual form from the US Court website.
  1. Schedule A: Real Property - This lists out all your real estate assets and equity.
  2. Schedule B: Personal Property - This lists out all non-real estate assets and equity.
  3. Schedule C: Property Claimed as Exempt - Here you will list the property which you will claim as exempt from the bankruptcy estate.
  4. Schedule D: Creditors Holding Secured Claims - This will list all of your secured debts, such as your car and house.
  5. Schedule E: Unsecured Priority Claims - Here you will list any priority debt you have, like student loans, family support debt and past due tax debt.
  6. Schedule F: Unsecured Non-Priority Claims - This form will outline all your other unsecured debts, the ones that will likely be discharged. You must include credit card debt, medical debts, personal loans, store accounts, etc.
  7. Schedule G: Executory Contracts and Leases - If you are leasing any property, such as a car lease, it would be included here. Also, any contractual obligations you have would be included here.
  8. Schedule H: Codebtors - Anyone who has co-signed for you must be identified here.
  9. Schedule I: Current Income of Individual Debtor - This form calculates all of your sources of income.
  10. Schedule J: Current Expenditures - All of your allowable monthly expenses are outlined on this form.
  11. Summary of Schedules - This worksheet sums up all of the preceding forms, and also includes an area for you to "swear" to the accuracy and completeness of the forms you've submitted.
  12. Declaration Concerning Debtors Schedules - Another form where you swear under penalty of perjury to the accuracy of your filings.
  13. Statement of Financial Affairs - This form is designed to identify recent transactions that may be "undone" as part of your bankruptcy.
  14. Individual Debtors Statement of Intentions - If you are filing for chapter 7, this form is where you will let the court know what you want to do with secured debts and it's collateral. For example, if you choose to keep paying your car payment, you would reaffirm that debt here.
  15. Current Monthly Income and Means Test - You've heard of the means test. Well here it is in all it's glory. This is a complex set of calculations designed to determine if you have the "means" to repay your debts under a chapter 13 plan.
  16. Notice to Individual Consumer Debtor - This is simply an informative document briefly telling you what bankruptcy can do, and advising you to hire an attorney.
Phew. Yeah, there are a lot of forms and it can be a little intimidating. If you're going to handle the case on your own, you'll need to give yourself a few days to gather all the necessary information, and carefully complete all of these forms. If that is the way you want to go, you should consider picking up one or two of Nolo's Bankruptcy Books. These are written by experienced bankruptcy lawyers and will walk you through everything step-by-step in plain English.

Ok, I Filed. Now What?
Once you've filed you paperwork, you'll get a date for your court hearing. In most cases, your hearing will only take a few minutes, and mostly the trustee will be going over the information you provided to ensure everything is up to par. See this article for more: What to Expect at the Bankruptcy Hearing

Before you can get your discharge, you will need to attend the required post bankruptcy credit counseling session.

If you've filed for chapter 7 and everything goes smoothly, then a few weeks (maybe months) later you will receive your notice of discharge and you are done.

If you've filed for chapter 13, you will also attend another hearing to "confirm" your payment plan and you will continue making the monthly payments (you start these when you file your paperwork) to the bankruptcy trustee until the completion of your plan.

What if I Hire a Lawyer to Do It?
Most people will wind up hiring a bankruptcy attorney to ensure their case is handled correctly. It's usually a good idea, simply because an attorney will know the laws, and more importantly, will be familiar with the local bankruptcy trustee. This experience will help you get more debt discharged and protect your equity.

Your attorney will probably have a questionnaire that will get him/her all the information needed to complete the paperwork for the court. The questionnaire will ask a lot of the same questions as the paperwork, but will be written in layman's terms so you can understand and complete it much more quickly.

Alternatively, sometime the lawyer or a staff person will have you come to the office to complete the paperwork together. In either case, you don't have to worry about making a mistake on your forms that can cost you your case.

Your lawyer will also represent you at the hearing and answer any questions the trustee has.

Most importantly, an attorney will help guide you in terms of deciding which bankruptcy (if any) is best for your situation, and will make sure you have a good understanding of how everything will work.

Learn More
If you are thinking about bankruptcy, see this Guide to Bankruptcy on BankruptcyLawFirms.com. It's a great introduction and will tell you what bankruptcy is, what it can (and can't do), how it works and what options you have under bankruptcy law.

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