Declaring bankruptcy can feel intimidating, and the filing process can seem overwhelming — but it doesn’t have to be. Once you determine bankruptcy is the right decision for your financial situation, an attorney and a bankruptcy trustee will oversee the process. They’ll assist you with any issues as they arise and ensure your case moves along as it should.
Below, Ron Lunquist, Attorney at Law, explains how bankruptcy works and what you can expect when you file.
Step 1: Hire an Attorney
Though you can file bankruptcy on your own, taking that route is never a good idea. Most people are not familiar with bankruptcy laws in their state and unfortunately, a lack of knowledge could make your financial situation worse.
To ensure you’re properly protected and represented, look for an experienced personal bankruptcy attorney who is deeply familiar with state laws. Do your due diligence — get a referral from someone you know and trust, read past clients’ reviews, and if possible, schedule free consultations to determine which attorney will best handle your case.
Step 2: Determine Which Chapter You’ll File Under
Once you’ve settled on an attorney, you’ll need to determine which type of bankruptcy you qualify for, either Chapter 7 or Chapter 13. Here’s a brief breakdown of the two types:
● Chapter 7. Also referred to as liquidation bankruptcy, Chapter 7 wipes out your dischargeable debts if you lack sufficient income to repay them. In most cases none of your property is lost in Chapter 7.
● Chapter 13. Also referred to Wage Earners bankruptcy, Chapter 13 allows you to create a repayment plan according to your discretionary budget, which allows you to pay what you can afford toward your debts. When you complete your payment plan as agreed, the remainder of your dischargeable debts will be wiped out.
Because there are specific requirements you must meet to file under Chapter 7 or Chapter 13, your attorney will guide you through the qualification process.
Step 3: Complete Credit Counseling
As stipulated in the federal Bankruptcy Code, you must attend and complete credit counseling from an approved agency within 180 days before you file for bankruptcy. If you are married, you must attend counseling together with your spouse.
Step 4: Complete the Paperwork
Your attorney will prepare your bankruptcy petition, the official form you must file to begin the bankruptcy filing process. You’ll complete a variety of required forms throughout the filing process and will also need to furnish documentation disclosing your financial information, including your:
● Monthly living expenses
● A certificate of credit counseling completion from an approved agency
● Pay stubs
● Tax return
When you file your petition, the court issues an automatic stay on collection actions from your creditors. This injunction prevents creditors from foreclosing on your home, repossessing your vehicle, garnishing your wages, filing a lawsuit, and even making collection calls.
Step 5: Meet Your Court-Appointed Trustee
When you file a petition, the court appoints a bankruptcy trustee to your case. This individual is responsible for overseeing your case and ensuring you understand the potential repercussions of bankruptcy. He or she is also responsible for distributing your payments to creditors under Chapter 13 or liquidating your non-exempt assets under Chapter 7. Ronald J. Lundquist knows and has worked with trustees for many years.
Step 6: Attend Your Creditor Meeting
Your trustee will organize and hold a meeting of your creditors, during which you’ll answer questions under oath regarding your assets, debt, income, and anything else that’s relevant to your case.
While this meeting can be nerve-wracking for some, it’s typically brief, and your attorney will be in attendance with you. The goal of the meeting is to verify that the information you provided in your paperwork is complete and accurate.
After the creditor meeting, the court will use the information you provide to determine whether you’re eligible to file under the bankruptcy chapter you requested. If you qualify, your case will proceed. If you don’t you can try to file under a different chapter.
Step 7: Repayment
If you file under Chapter 13, the court will confirm your proposed repayment plan, and you’ll be responsible for adhering to its terms. If for any reason you cannot make your payments as agreed, the court may convert your case to a liquidation bankruptcy case (Chapter 7). Depending on the circumstances surrounding your inability to pay, the court may also grant a hardship discharge or modify your payment plan.
If you file under Chapter 7, you won’t be required to repay your dischargeable debts directly.
Step 8: Discharge of Debts
In Chapter 13 bankruptcy, you must complete your repayment plan as agreed, after which your remaining dischargeable debts will be wiped out. After the discharge, your individual creditors may not take any further collection actions against those debts. You’ll also need to complete an approved personal financial management course before the court will close your case.
In Chapter 7 bankruptcy, your dischargeable debts will be wiped out after your trustee liquidates your non-exempt assets and pays your creditors. If all of your assets are exempt, you won’t lose any property and your debts will still be discharged.
Have Questions About Bankruptcy? Contact Ron Lunquist, Attorney at Law
If you believe bankruptcy is the right decision for your financial situation, get in touch with Ron Lundquist, Attorney at Law. I’ve proudly helped Twin Cities residents navigate their bankruptcy claims for over a decade and am a well-recognized expert who can help you understand your options and rebuild your finances. To schedule a free consultation to learn more, please call my office today at 651-454-0007 or send me a message with your questions.