Arriving at the decision to file bankruptcy is not an easy process. No one sets out with the intent of filing bankruptcy, but there are times when filing bankruptcy is the best option for resolving a debt problem. For many people, filing a Chapter 7 or Chapter 13 bankruptcy case may be the first time they are involved in a court case. On top of being worried and stressed about the financial situation, they are nervous about going to court.
It can help ease nerves and make the process of filing for bankruptcy relief a little easier if you understand the basic steps involved in filing a bankruptcy case.
Steps in A Bankruptcy Case
- Deciding What Chapter of Bankruptcy to File
The first step is to decide whether you need to file under Chapter 7 or Chapter 13. The process beginswith completing the Means Test to determine if you meet the income requirements for a Chapter 7 or a Chapter 13. Other factors to consider are the types of debt involved, income, expenses, and assets. It is important to choose the correct chapter of bankruptcy, or you could lose assets or pay for debts that you could discharge.
- Take a Credit Counseling Course
The Bankruptcy Code requires that debtors complete a credit counseling course before filing a Chapter 7 or Chapter 13 bankruptcy petition. The U.S. Trustee’s office provides a list of companies that are authorized to offer the class in each state. After completing the court (online, in person, or by telephone), the company issues a certificate that must be filed with the court. The fees for this course are usually nominal and may be waived if the debtor meets specific financial requirements.
- Gather Information to Complete Forms
You must complete the bankruptcy petition, schedules, and statements to be filed with the court. In order to do this, you will need certain financial information and personal information including your income, expenses, debts, assets, and financial history. Completing the bankruptcy schedules can be difficult if you are not familiar with bankruptcy law. Hiring an experienced professional can ensure the forms are complete and correct before they are filed with the court. Mistakes can result in costly delays and denial of your bankruptcy discharge.
- Attend The 341 Meeting of Creditors
The court will schedule your first hearing which is referred to as the 341 Meeting of Creditors. It is an informal hearing conducted by the bankruptcy trustee. The trustee places you under oath and asks questions about the documents you filed and your financial situation. Creditors may also appear at the hearing to ask questions.
- Chapter 13 Confirmation Hearing
If you file a Chapter 13 bankruptcy case, you also must file a proposed bankruptcy plan. A second hearing is scheduled in Chapter 13 cases to resolve issues related to the proposed plan. Once the plan is confirmed, you will continue making your payments to the trustee each month and following the terms of the plan until the plan is complete.
- Debtor Education Course
Before receiving your bankruptcy discharge, you must complete a second bankruptcy course. The debtor education course is designed to provide important information about budgeting, credit, and wise money management. You must complete this course and file the certificate before the deadline, or you will not receive a discharge.
- Bankruptcy Discharge
If everything goes well, you receive your bankruptcy discharge at the end of your case. The clerk of court issues an order discharging the debtor and closing the case. Your bankruptcy discharge relieves your legal liability to pay any debt that was discharged in your bankruptcy case. It also prevents creditors from taking any collection action on a discharged debt.
A Brief Overview
The above information is a brief overview of the bankruptcy process. Parties can file a variety of motions and objections to various aspects of the bankruptcy case. If you have more questions, contact a professional who has experience handling bankruptcy cases. After reviewing your case, a trained professional can provide guidance about the steps involved in filing your bankruptcy case.