September 29th, 2009

Much of the fear or uneasiness associated with bankruptcy stems from not knowing or understanding what to expect and what the actual process will be.  With that in mind I thought I would go step by step through the bankruptcy process in your typical Chapter 7 and Chapter 13 bankruptcy cases.

The Process of Pre-Filing

Much of the work in your bankruptcy is completed prior to your case actually being filed with the bankruptcy court.  Initially, it is vital that you meet with an attorney to discuss the various Chapters available under the Bankruptcy Code and to further discuss the best way to protect assets throughout the bankruptcy process.  While there are people who file bankruptcy without an attorney, it is not recommended.  The Bankruptcy Code is very large and quite technical, making it very easy for those unacquainted with it to make a misstep that could prove very costly in the long run and even possibly get your case dismissed.

At Jackson White, after you call in we will set up a free consultation with you to discuss your particular financial situation and to help you determine what chapter under the Bankruptcy Code you should file under (or if you should even file bankruptcy).  Once the decision has been made to move forward, you will be given a questionnaire to fill out that covers all of your debts, income, assets, and financial history.  It is vital to the process that you disclose all assets and all debts accurately in the early stages of bankruptcy.  You will also be asked to get documents together such as tax returns, bank statements, and pay stubs.

After this information has been provided, it will be used to prepare the bankruptcy petition and schedules.  The bankruptcy petition is a document that contains information such as your name, address, and any prior bankruptcies.  The schedules contain information on your assets, debts, income, and monthly expenses.  Once complete, you and your attorney will review the documents for any errors.

Prior to filing your bankruptcy case, the Bankruptcy Code mandates that you take a credit counseling class.  At Jackson White we work with credit counseling providers to help you in getting this requirement taken care of and can even be done online or over the telephone.  This is an important step as your case cannot be filed until the credit counseling course has been completed.

Now that the bankruptcy documents and credit counseling course have been completed, your case is ready to be filed.  In bankruptcy court in the District of Arizona all case filings are done electronically over the Internet.

The Post-Filing Process

Upon filing your case, you will receive a case number from the court and pursuant to the Bankruptcy Code the “automatic stay” is in effect.  The automatic stay bars any collection efforts against your or any of your property.  This is a powerful tool and will stop foreclosures, repossession, even telephone calls.

U.S. Trustee

Your case will be assigned a trustee who represents the United States Trustee’s Office, a division of the Department of Justice.  The trustee’s purpose is to review your case and make sure that you are in compliance with relevant sections of the Bankruptcy Code.  In a Chapter 7 bankruptcy case, the trustee will review your assets and if warranted, can seize non-exempt assets for liquidation.  In Chapter 13 cases, you will make your monthly plan payment directly to the trustee.

Shortly after you file you will receive a letter from your assigned trustee that contains a questionnaire and makes requests for items such as bank statements, copies of titles to vehicles, and tax returns.  It is important to gather all requested documents and return them to the trustee in the requested time.  Failure to do so will delay your case and even possibly result in your case being dismissed.

Chapter 13 Plan

If you have filed a Chapter 13 case, you will have a Chapter 13 plan payment that must be paid monthly.  The first plan payment is due 30 days from the date your case was filed.

Meeting of Creditors

Approximately 30 days after your case is filed you will be required to go to the Bankruptcy Court to attend the Meeting of Creditors.  The Bankruptcy Code provides that creditors and the trustee are to have an opportunity to ask questions.  It is rare that a creditor will actually make an appearance at the Meeting of Creditors.  However, the trustee will place you under oath and ask questions about your bankruptcy filing and the documents you provide in response to the trustee’s letter.  Most of these questions are centered on the truthfulness of your documents and information as well as any transfer of assets.   I attend this meeting with all clients and am there to answer any questions a client may have.  This meeting it typically 5-10 minutes long.  While the Meeting of Creditors is an important day and something that must be taken seriously, it is nothing to lose sleep over.

Discharge

The goal of the bankruptcy case is to obtain a discharge.  Upon discharge, you are no longer liable for the debts that are provided for in your bankruptcy schedules.  Prior to receiving your discharge you must complete a second credit counseling class.  This second course is actually a Financial Management course.  Again, at Jackson White we will provide you with a course that can be completed online.

In Chapter 7 bankruptcy cases, you should receive your discharge approximately 90 days after your Meeting of the Creditors.  In Chapter 13 cases, you will not receive your discharge until after you successfully make all payments provided for in your Chapter 13 Plan.  This occurs after the plan is complete.  Most plans are in the 36 month to 60 month range.

Closing of Case

The fact that you have received your discharge does not mean that your case is now closed with the bankruptcy court.  However, once your discharge has been issued, in most cases the bankruptcy court will close your case out within 30 to 60 days.

While not every case is the same, understanding the basic process of filing bankruptcy can reduce a great amount of stress and give you greater insight into how your case is being handled by the court.

Arizona Bankruptcy Attorney John Skiba offers free consultations on all bankruptcy matters.  If you would like to meet with Mr. Skiba call (480) 464-1111.