The decision to file for bankruptcy is never an easy one. Your home, business, and relationships can all be impacted by bankruptcy. Your home may be forfeited in the liquidation. Your business may be sent into trusteeship. Your creditors may be personal friends or family left holding the bill for your debt.
And then of course there's the impact on your credit score. Filing for bankruptcy puts a black mark on your credit score for at least seven years. During those years, you will not easily obtain credit for credit cards or bank, auto, home or business loans. In some instances, you will spend that time slowly repaying your debt under the watchful eyes of the court.
We all know what it's like to face bills larger than we can handle. Whether it be from unexpected emergencies, a job loss or financial mismanagement, most people are forced to ask "How am I going to pay this bill?" at least once in their life. However, if you've run out of time on your debt or foreclosure is pending on your home, bankruptcy may be your best option[i].
Filing for bankruptcy is a very daunting process, especially if you attempt to represent yourself. If you are able to, we HIGHLY recommended that you seek the advice of an attorney and/or bankruptcy petition preparer prior to attempting representation in pro per. Though the Trustee system and courts often give a bit more leniency to self-represented petitioners, they are under no obligation to do so. The courts are heavily burdened with Bankruptcy petitioners and are impatient. You also need to figure out which chapter you will file for. Generally individuals file for Chapter 7 which is the liquidation of all consumer debt. Chapter 11, 12, and 13 are reserved for corporations or for individuals planning to repay their debt with installments. If you are planning to file for Chapter 13 you will absolutely need an attorney.
To begin a Chapter 7 filing you must complete a pre-filing workshop and obtain a certificate of completion within 180 days before you file. The certificate will need to be included with the petition. The petition itself is about forty pages. You will be asked about your liabilities, assets, income, expenditures and all of the creditors with whom you have an outstanding balance. Along with the petition you will need to file Form B21 (Statement of Social Security Number) and a Statement re Payment Advices. The creditors listed on Schedule F in the petition need to be compiled into a simple list known as the Creditors Matrix. Once you file a hearing will be scheduled for four to five weeks later.
A trustee will be assigned to you for the purposes of managing your case and you will need to attend a 341(a) meeting of the creditors. Your creditors have the right to attend this meeting and if they do, you'll be glad you have your attorney with you! You will want to bring your taxes from the previous year because the trustee will ask you for much information about your spending habits, income earnings and any savings. The primary focus is to ask any questions regarding the statement of financial affairs or your liabilities and assets that appear incomplete or suspicious. The trustee will be more interested in your valuable assets so you should be prepared to answer questions regarding such property and provide the necessary documents. Also be prepared to answer any questions regarding any prepetition transfers that may appear preferential or fraudulent.
Debtors may affirm a debt that would have been discharged in a bankruptcy case. The Bankruptcy Code allows a debtor to reaffirm a specific debt as long as the debtor was not coerced into reaffirmation without understanding its consequences. Enforceable reaffirmation is difficult to obtain under the Bankruptcy Code. For the agreement to be enforceable, a valid affirmation requires the following conditions: the agreement was made before the discharge was granted, the agreement is filed with the court; the agreement explicitly states that the debtor may rescind it, by providing notice to the creditor, at any time before discharge or within 60 days after the agreement is filed with the court; the debtor receives disclosures set forth in ?524(k) before signing the agreement; if the debtor was represented by counsel in the agreement's negotiation, the debtor's attorney must file an affidavit or declaration with the agreement filed with the court, which states that: the agreement represents a fully informed and voluntary agreement of the debtor; the agreement does not impose undue hardship on the debtor or his or her dependents; and the debtor was informed of the legal effect of the agreement and the consequences of default. If the debtor is unrepresented, the court must find that the reaffirmation does not present any hardships and is in the debtor's best interest.
Keep in mind that it takes approximately 90 days after you file to complete the processing including your hearing date and assignment of trustee. Don't forget to attend a post-filing workshop after your hearing.
After your 341(a) hearing, if the trustee feels you've adequately answered his or her questions, you will be dismissed. Your discharge will be granted as soon as it is processed, in some instances as long as one year after filing! If your trustee feels you did not adequately address their questions, you will be re-set for another 341(a) hearing and will have to go through the process again. Thank goodness your attorney charged a flat fee- you won't incur extra fees for these extra meetings.