The Bankruptcy Process - A Step by Step Guide

8/12/2019 The Bankruptcy Process - A Step by Step Guide

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SCOTT R. NEEDLEMAN

COLUMBUS BANKRUPTCY AND FORECLOSURE DEFENSE ATTORNEY

THE BANKRUPTCY

A STEP BY STEP GUIDUnderstand the Bankruptcy Process

in Ohio Before Getting Started

with Your Bankruptcy Petition

PROCESS


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e Bankruptcy Processa Step by Step Guide thecolumbusbankruptcylawyer.com

The decision to file bankruptcy

is never made lightly. Most

debtors struggle with the

decision for months trying to

avoid bankruptcy, frequently

getting themselves even deeper

into debt trying to juggle

financial obligations. Due in

large part to the recent

recession, the number of bankruptcy filings have hit record highs in the

United States. If you are one of the millions of people across the country

who has made the difficult decision to file for bankruptcy, you are likely

apprehensive about the process itself and unsure what to expect. Although

every bankruptcy petition is unique, there are some basic steps that most

debtors go through during the bankruptcy process. Understanding the

process better before you get started may ease some of your

apprehension.

MAKING THE DECISION

You may have already considered all of the pros and cons to filing

bankruptcy as well as considered the alternatives; however, if you havent

made a decision yet there are factors that you may wish to take into

account before making a decision. Typically, if you are in enough financial

trouble to consider bankruptcy then your credit rating is likely already

suffering. If, however, you have managed to maintain a decent credit score

then the effect a bankruptcy will have on your score is a valid

consideration. Typically, your credit rating will drop when you file for

bankruptcy if your file a chapter 7. How much it drops will depend on many

factors. The good news is that your credit rating may start to rebound as

soon as the bankruptcy is discharged in the case of a chapter 7

bankruptcy. A chapter 13 bankruptcy filing may negatively impact your


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credit rating but it will not typically have the same impact as a chapter 7

filing because a chapter 13

calls for you to repay your

debts.

You may also wish to

consider what type of debt

you need to bankrupt.

Some debts, such as

student loans and child

support, cannot be

discharged through a

bankruptcy. Be sure thatyour debts can be discharged before making the decision to file for

bankruptcy.

CHOOSING AN ATTORNEY

Once the decision has been made to pursue bankruptcy the next step

should be to choose an attorney. Technically, there is no legal requirement

that a debtor be represented by an attorney when filing for bankruptcy;however, given the complexity of the subject matter, the importance of the

outcome, and the sheer volume of paperwork involved it is a wise decision

to retain the services of an experienced bankruptcy attorney.

CHOOSING A CHAPTER

The US bankruptcy code is divided into chapters. It is for this reason that

we refer to the type of bankruptcy that someone files as a "chapter 7" or"chapter 13". There are four different chapters under which an individual

debtor may file for bankruptcy-chapters 7, 11, 12, and 13. Although

available to an individual, a Chapter 11 is typically used by small

businesses. A chapter 12 bankruptcy is for family farmers and fishermen.

That leaves chapters 7 and 13. A chapter 7 bankruptcy is known as a


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"liquidation" because a debtors nonexempt assets are sold by the trustee

to provide liquid assets with which to repay creditors. A chapter 7

bankruptcy requires a debtor to pass a "means test". In short, the means

test compares your income to that of other similar households in Ohio. If

your income is at or below the median income for similar households then

you may file a chapter 7 bankruptcy. At the end of the chapter 7

bankruptcy the majority of your debts will be discharged, or forgiven.

A chapter 13 bankruptcy is typically used by debtors with above average

income and/or who have valuable assets that they wish to retain. In a

chapter 13 bankruptcy you will be required to create a repayment plan that

will allow you to repay the majority of your debts over an extended period

of time-usually three to five years.

GATHERING DOCUMENTS

There are a number of documents and records that you will need to put

together in order for your attorney to prepare the bankruptcy petition and

all of the required schedules. While the required documents will vary from

one debtor to another some common documents and records include:

Income tax returns

Pay stubs or 1099s

Deeds and titles

Loan documents

Creditor names and addresses

TAKING THE CLASS

Before you are allowed to file your bankruptcy petition you must complete

a credit counseling class. There are several ways that you may complete

the class including an online option. There is a small fee required for the

class. You must provide proof of completion along with your bankruptcy

petition. You are also required to complete a debtor education class which


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must be taken after you file but before the bankruptcy is discharged. The

options for completing this class are typically the same as the credit

counseling class.

FILING THE PETITIONWhen you have completed the class and gathered the required documents

you will meet with your attorney to begin preparation of the petition. The

petition essentially just asks the court to grant you relief from your debts

pursuant to the US bankruptcy code. There are number of schedules that

must also be prepared and attached to the petition. These schedules

include things such as creditor information, income information, and asset

information. Once the petition and schedules are ready you will sign them

and they will be filed with the appropriate U.S. Bankruptcy Court. As soon

as the petition is filed the court will grant an automatic stay. The automatic

stay is a court order

that prohibits

creditors from

attempting to collect

on a debt. This

includes all debtors

and all debts. Every

creditor listed on your

schedule of creditors

will be notified of the

automatic stay.

341

HEARING

In both a chapter 7 and chapter 13 bankruptcy you will be required to

attend a "341 hearing". Named for a section of the bankruptcy code, the

341 hearing is also referred to as the meeting of creditors. The meeting is

typically held in either an informal office located in the federal courthouse


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or at the trustee's own private office. It will not take place in open court at

any rate. In fact, if you file a chapter 7 bankruptcy you will typically never

set foot in a courtroom. The purpose of the meeting of creditors is to allow

creditors to examine you under oath regarding your income, debts, and

assets. In a chapter 7 bankruptcy it is not uncommon for none of the

creditors to appear at the meeting of creditors. In a chapter 13 bankruptcy

there is a higher likelihood that creditors will appear for the 341 hearing,

particularly if you have secured debt included in your bankruptcy. You and

your attorney will prepare ahead of time for the meeting; however, the

questions are usually simple enough to answer as they usually relate to

information that has already been included in your bankruptcy.

REAFFIRMING SECURED DEBTS

Some debts are secured by collateral, such as a mortgage loan or a car

loan. In a chapter 7 bankruptcy you will need to decide what you plan to

do about any secured debts. If you decide that you wish to keep the asset

used as collateral than you will need to reaffirm the loan. Essentially, this

means that you'll execute a document known as a reaffirmation agreement

which states that you plan to continue making the payments on the original

loan. This protects your collateral but also means that you will still be

legally responsible for paying the debt after your bankruptcy is discharged.

RE-PAYMENT PLAN (CHAPTER 13)

If you filed a chapter to the bankruptcy your actual involvement in the

bankruptcy process is complete at this point in time as a general rule. If

you filed a chapter 13 bankruptcy you will need to prepare a repayment

plan at this point. This involves determining what your monthly income is

as well as necessary expenditures such as housing, food, and utilities. You

will then determine how much money you have each month available to

repay creditors. Each creditor will then receive a percentage of that money

based on the amount you owe that creditor and what priority the creditor


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has in the bankruptcy. When the repayment plan has been approved you

will send one monthly payment to your trustee each month whe will then

distribute the funds among your creditors.

RE-PAYMENT CONFIRMATION HEARINGAfter your repayment plan has been created by you and your attorney you

will submit it to the bankruptcy court. The court will then set a confirmation

hearing date. On that date you and your attorney will appear in court to

review your repayment plan. Once the judge is satisfied that your

repayment plan is acceptable the judge will officially approve the plan at

which point you will begin making your monthly payments to the trustee.

If you file a chapter 7 bankruptcy your bankruptcy is typically discharged

about 60 days after the meeting of creditors. Typically, the entire chapter 7

process only takes about four months. When your bankruptcy is officially

discharged all of your debts (except those that are non-dischargeable) are

forgiven, meaning you are no longer legally obligated to pay them. If you

file a chapter 13 bankruptcy the case will remain open during the length of

your repayment plan-typically three to five years. At the end of your

repayment plan any remaining debts that are eligible are usuallydischarged, or forgiven.

Now that you have a general understanding of the steps involved in the

bankruptcy process it should ease some of the apprehension you had

about the process.

United States Courts, Bankruptcy Basics

NOLO,A Chapter 7 Bankruptcy Overview

NOLO,Steps in a Typical Chapter 13 Bankruptcy Case
http://www.uscourts.gov/FederalCourts/Bankruptcy/BankruptcyBasics.aspxhttp://www.uscourts.gov/FederalCourts/Bankruptcy/BankruptcyBasics.aspxhttp://www.nolo.com/legal-encyclopedia/chapter-7-bankruptcy-overview-29571.htmlhttp://www.nolo.com/legal-encyclopedia/chapter-7-bankruptcy-overview-29571.htmlhttp://www.nolo.com/legal-encyclopedia/chapter-7-bankruptcy-overview-29571.htmlhttp://www.nolo.com/legal-encyclopedia/steps-chapter-13-bankruptcy-case.htmlhttp://www.nolo.com/legal-encyclopedia/steps-chapter-13-bankruptcy-case.htmlhttp://www.nolo.com/legal-encyclopedia/steps-chapter-13-bankruptcy-case.htmlhttp://www.nolo.com/legal-encyclopedia/steps-chapter-13-bankruptcy-case.htmlhttp://www.nolo.com/legal-encyclopedia/chapter-7-bankruptcy-overview-29571.htmlhttp://www.uscourts.gov/FederalCourts/Bankruptcy/BankruptcyBasics.aspx


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About the Author

Scott R. Needleman

Every associate at The Needleman Law Office is committed to handling

your case in both a personal fashion and in a professional manner. In other

words, we treat you the way we would want to be treated. We will take a

personal interest in your situation, making sure you understand exactly

what is happening and what options you may have. Then well fight to

ensure the best possible outcome for your situation.

The Needleman Law Office5300 E. Main, Suite 109Columbus, OH 43213

614-575-1188

http://thecolumbusbankruptcylawyer.com/
http://thecolumbusbankruptcylawyer.com/http://thecolumbusbankruptcylawyer.com/

The Bankruptcy Process - A Step by Step Guide

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